Every entrepreneur knows that customers are important. Without customers, you wouldn’t have a business. These are the patrons who buy your products and services, supplying your company with revenue so it can serve other customers; they’re the biggest link in the chain.
Naturally, most entrepreneurs focus heavily on what they can do to become valuable to a customer. They want to improve their products, improve their services and even serve customers better with better customer service and sales reps.
But what about the other side of the equation? What is it, specifically, that makes customers valuable to you? And how can you boost that value?
Most companies attempt to project the lifetime value that a customer can bring with an objective metric called “customer lifetime value” or something similar. Generally, this equation tries to estimate how much money a customer will spend with the company, taking into account how long they’re going to buy products and how many products they’re going to buy.
Every customer is different, of course, but customer lifetime value attempts to approximate the average user.
There are more factors to consider in this equation — and ample ways in which you can maximize your effectiveness.
First, you need to think about the purchases that a customer makes. By definition, a customer will be making at least one purchase from your business, but there are several variables you can improve in this dimension.
Customer loyalty also matters. You may have a customer willing to buy significant volumes of your product — but what happens when they leave after a month to switch to one of your competitors? This is why customer retention is so valued among successful businesses; encouraging repeat customers with loyalty rewards programs, discounts and other incentives can ensure that your best customers stick with you as long as possible. Good products, good customer service and ongoing support can also help.
Some of your customers are capable of doing good for your brand in excess of their traditional purchases. If they like your brand enough, they’ll evangelize it to others. In some cases, this amounts to a handful of referrals to friends and family members. In other cases, your brand evangelists will basically advertise on your behalf, showing off your products and engaging with your brand on social media.
You can encourage this by surprising your most loyal customers with extra rewards and maintaining a solidly active social media strategy. But much of this happens as a natural byproduct of company excellence.
Value can also be considered as the difference between the proceeds from your customers and the costs it took to acquire them. Accordingly, it’s beneficial to calculate your customer acquisition costs when running these equations. If you can decrease your acquisition costs while keeping your total customer value high, you’ll stand to see significant gains.
So what steps can you take to maximize the value of your average customers?
With a better customer value strategy in place, you’ll be able to serve your customers better and generate more revenue simultaneously. It’s not always a straightforward process, but with the data backing your decisions and a bit of creativity, you can create a strategy that’s much more streamlined for your organization.
Originally appeared in Entrepreneur