CLTV indicates the total revenue you expect to earn per customer. It measures a customer’s value over the entire lifetime. This metric tells investors the value of newly acquired customers over the long run.
Calculation:
Customer Lifetime Value = Average revenue per account (ARPC) x average customer lifetime
There are two basic ways to improve CLTV. On the one hand, you can increase your prices and, therefore, the customer account value in a specific period through upselling or exploring your specific price elasticity. On the other hand, you can try and decrease churn. There are several possibilities to improve retention rates and reduce churn.
Examples:
1) Onboarding Optimization
Sometimes it can be complicated for customers to understand how to use all the features of a product, leading to the phenomenon that, in most cases, churn is the highest within the first few days of acquiring new users or customers. So, it is crucial to have user-friendly onboarding, which will make an excellent first impression on a customer and significantly improve your 7-day retention rate, leading to a higher CLTV.
2) Effective Communication
An organized communication line will make customers’ lives easier and create a binding connection with a brand. It should be easy to reach out to a company at any moment. Most of the time, a simple acknowledgement of customer’s feedback is enough to make a company’s image even better.
3) Loyalty Program
A series of incentives for repetitive purchases or interactions can improve the customer experience and increase customer engagement. A reward or loyalty score system can also add a “gamification effect” that makes customers more involved.
4) Re-engagement campaign
A re-engagement campaign is an excellent tactic to increase your CLTV. You already have available contact data, and you know that they were at one point engaged with your product and brand. Therefore reacquiring former customers already familiar with your product and brand is usually around 4x cheaper than acquiring new customers.