Our last post defined customer lifetime value (CLV) as the metric critical in measuring the success or failure of a recurring revenue program. In order for your company to routinely return significant revenue, maximizing CLV needs to be at the top of your priority list. A CLV-supported strategy boosts many aspects of your business, from sales to customer service. When it comes to increasing customer retention and customer satisfaction, the two keys to driving long-term results, this same strategy works to increase both at every available opportunity.
It’ no surprise that 75% of North American senior executives say CLV is a highly or extremely valuable indicator of success when looking at the numbers. 80% of a company’s future profits come from only 20% of its existing customers. Customer retention over time exponentially grows your recurring revenue and overall bottom line. Not only do you need to retain your customers, but you need to retain satisfied customers. And it pays to have satisfied customers – a totally satisfied customer contributes 2.6x as much revenue as a somewhat satisfied customer.
If your goal is to maximize CLV (and it should be!), then the steps you need to take to do so include increasing customer retention and customer satisfaction. Putting forth a concerted effort to keep these numbers high will return the recurring revenue that keeps your company profitable.
Stay tuned for the third, and last, installment of this CLV miniseries where we’ll explore how to maximize customer lifetime value through interactions. Remember, success is defined by wins in revenue and loyalty – the more interactions you have, the more opportunities to increase overall CLV and revenue.