I am often asked,
What is the best way to develop and implement strategies to increase customer value?
1. Sales: Increase per customer sales
In short, sell more to your existing customers. The most common tactics used here are the basics of cross-sell and upsell. Both of these are good approaches. However, there is a tendency for companies to over use them. This can result in a negative impact on customer relationships.
There are a wide a variety of other strategies that can be used, many ways to implement them, and little need to just focus on cross and up-sell.
For instance, a company can also deliver customer value through down-sell and usage stimulation. Consider a Bank that, instead of sending more product cross sales offers, sends credit cards to customers and offers to increase in their credit limit. They know that, on average, when a customer’s credit limit goes up they will use at least some of that extra limit. This then is usage stimulation: same product, more sales.
How might you apply this thinking to your own business?
2. Loyalty: Retain customers longer
The second way to increase customer lifetime value is by retaining customers for longer. It is true that it costs a lot less to retain a customer than to acquire a new one so it is well worthwhile to spend some extra effort to retain the right customers.
There is a range of tactics that you can use to retain customers longer:
Customer education on products purchased
Customers tend to “leave” because of another product or service that has a feature which they believe you do not have, even if you do. If you have a “moderately complex” product or service, it can be well worthwhile to educate customers about it.
Saving customers who indicate that they no longer want the product/service
Whether you know it or not, you’ve probably been through a “save team” or customer retention process. If you have ever asked to cancel your mobile phone contract, then it is almost certain that you have been put through to another department to process the cancellation. That department is normally a specialized Save team. Save teams are trained to keep customers and often have access to better offers and incentives to help the process along.
Rewarding and recognizing customers for their ongoing business
This pertains to the use of the now ubiquitous “loyalty program”. Of course, you can spend a lot of money and never change the loyalty of your customers. So you need to be certain that your loyalty program is delivering a net customer value improvement.
Improve you customer experience
Customers often leave because of the experience they receive as customers. Continuously improving your customer experience is a key driver of long-term customer loyalty, and starts with putting in place a system to continuously gather customer feedback.
3. Cost: Lower the cost to serve
Lastly, you can simply lower the cost to serve your customers. This again comes in many forms but two important ones are:
Stop marketing to low value customers
Ensure that you are not continuing to market to customers who cannot or will not buy more of your products and services.
Move customers to lower cost channels
This, if done well, can add substantial value to your business. However, you should take precautions because it can back fire badly.
Back when ATMs first came out in Australia, all the banks rushed to install them and move as much foot traffic to the “lower cost to serve” ATM channel. This worked perfectly to lower cost.
However, the banks soon discovered that they had also lost a large volume of their cross -sell opportunities. This is simply because when customers come in to the branch to perform a transaction, they are more likely to set aside time to perform the transaction and so can spend a few minutes discussing other products and options with staff. This is in contrast to outbound contact methods: phone calls and direct mail, which are “interruptions” in the day of customers – something to be disposed of as soon as possible.
Making it Happen
The key to implementing effective strategies for delivering customer value is in selecting combinations of approaches that give you synergistic impact on customer value. For example, combining cross sell, upsell and customer education in one campaign. With a single campaign you can support and enhance the customer perception of your organization and increase customer loyalty.
Key elements that form the foundation for developing and implementing a combination of strategies that deliver customer value are:
Select practical strategies that can be implemented by your company and take into account your company’s systems abilities. For example, do not select strategies that require significant investment in systems changes with the associated high costs or long implementation cycle. Rather, select strategies that can be easily and quickly translated into initiatives that can be implemented with current systems.
Determining the appropriate time to contact customers, and selecting the most appropriate communications channel is important. Do not base the timing on what is appropriate for the company. Instead, look at what the customer would want.
Current Spend/Future spend
Ensure that you consider customer value according to both their current and potential spend with your organization. A low value customer may be “low value” to your organization and extremely profitable to your competitor as majority of their spend is not with you. This is where the idea of share of wallet becomes so important.