A simple way to increase Lifetime Customer Value (LTV):
At the highest level, there are only 3 ways to increase Lifetime Customer Value (LTV):
- More products
"How can there only be 3 ways to increase LTV?" you ask - what about (among other things) customer retention, pricing models, product personalization and better positioned marketing campaigns?
Yes, all of these contribute to greater LTV, but only in the sense that they support, enable or optimize cross-sells, up-sells and product line extensions.
Therefore, when looking to increase LTV, start first by brainstorming how to package your current and potential assets (either produced in-house or in partnership with others) into cross-sells, up-sells or new products.
Then, work backwards in terms of what you would need to do that would consequently result in closing the sale of a new product, cross-sell or up-sell.
Here's an example, using an online bookstore that decides to focus on an enhanced revenue stream via upselling:
- Step 1 (Asset Evaluation): Evaluating sales data, it finds that certain classic novels are strong sellers and that deluxe collectors editions are a good option to use as upsells
- Step 2 (Creating the Upsell): Partner with small independent publishers to create limited edition deluxe versions with hardcover binding, illustrated pages and forewords from contemporary literary critics
- Step 3 (Marketing the Upsell): Kick off targeted email campaigns for customers who bought other classic novels and/or genres that correlate with purchases of classic novels (maybe the history buffs or poetry fans)
- Step 4 (Closing the sale and nurturing the relationship): Offer exclusive bundles and special discount coupons at checkout to close the sale. Follow-up with personalized book recommendations to nurture the customer experience
In other words, first determine if you want to increase LTV via an up-sell, cross-sell or new product.
Then work backwards to determine the sequence of steps needed to sell this new revenue stream.
And yes, it's perfectly normal to have an incomplete knowledge of what you need to do to get to the money.
In other words, some steps you will know (i.e. known knowns).
Other steps you know you have to research (i.e. known unknowns).
And then there may be steps that are completely invisible to you (i.e. unknown unknowns). For these, you will need either a shift in perspective (a different context) and/or new knowledge (but within the same context) that reveals the existence of this unknown unknown.
Aside from determining which of the 3 high-level LTV approaches you want to pursue, one of the most important things is to keep existing customers happy so that they:
- Buy the same product more frequently
- Buy more per transaction (e.g. buying two of the same product)
- Buy new products
- Give you word-of-mouth (or increased word-of-mouth)
To keep customers happy, think in terms of:
- Activation: Get them using your product for the first time following sign-up (many users never actually activate following sign-up)
- Engagement: Using your product on a consistent basis and integrating it into their workflow or life
- Retention: Turn them into loyal users and buyers
To increase LTV, you will also want to keep things such as your cost of acquisition (CAC), cost of serving the customer and other operational expenses as low as possible.
But when I say "low as possible", I mean without compromising a baseline quality, customer experience, or delivered value necessary to attract and retain the customer.
At the end of the day, the greatest upside in higher LTV is in effectively leveraging the 3 levers of up-sells, cross-sells and new products (and not by only keeping costs low).