While attracting new customers into your store may be a prime focus of your retail strategy, holding on to the loyal consumers you already have should be equally, if not more, important.
Nurturing the customers currently using your services or products can be a profitable endeavour, as it often costs less to retain a consumer than to attract a new one. It is therefore vital to increase your customers’ lifetime value, particularly those clients likely to make repeat purchases.
For retailers in Australia hoping to improve client retention, customer lifetime value (CLV) is a crucial concept to help identify and understand consumer loyalty. However, according to a recent survey from Econsultancy, more than half of all company stakeholders are unsure how to measure CLV.
As part of the Building Loyalty and Driving Revenue in the Digital Age report, Econsultancy surveyed around 800 agency and company leaders about their knowledge of CLV.
Of the respondents, just 42 per cent said they were able to accurately measure CLV. Additionally, just 11 per cent felt confident of their ability to measure CLV, while a further 31 per cent only ‘somewhat’ agreed they were up to the task.
While measuring CLV can be a difficult endeavour, there are some simple steps to help you incorporate CLV into your retail research.
The Harvard Business School has released a tool to help organisations measure their customer value over a lifetime. The formula measures the average spend per purchase, the number of purchases per year, the direct marketing costs per customer and the average life span of a customer.
This tool helps businesses arrive at a dollar value that can be easily associated with the long-term relationship with any given customer.
Once you have calculated the CLV of your customers, you can use this number to adjust your retail marketing and business objectives. It may be helpful to group customers together in categories based on their loyalty, or even the number of purchases they make each year.
If you find your CLV numbers are low, you may want to look into your customer experience. The vast majority of companies surveyed by Econsultancy (89 per cent) agree that customer experience is the key factor in driving consumer loyalty and retention.