Can We Support Customers Based on Their LTV?

Posted By: author
Posted On: 14 Nov 2019

Factor Customer Lifetime Value in Customer Service

One of the important goals of any business is to keep increasing the value of your customers. Several marketing techniques are responsible for the conversions, but efficient customer service is the key for them to keep buying. Customer service and support increases sales thereby revenue through the lifetime value of your customers. Customer Lifetime Value is an overlooked metric that can accurately predict how much your customers are really worth. 

A sales database is a powerful marketing weapon that is used to record all prospects and customer information. These can be contact details, personal data, customer preferences of past, present and potential customers. You will be able to store and monitor your customer’s behaviour on the basis of your marketing activities with them. Hence through the analysis of the customer experience and measuring feedback at all key touchpoints, you can calculate Customer Lifetime Value.

Customer Lifetime Value Calculations for different customer segments can be done by tracking these major metrics: Average Order Value, Purchase Frequency, Average Customer Lifespan and Customer Value.

Customer lifespan is the duration of time a customer actively participates in transactions before they become inactive and stop making purchases permanently.

Average Order Value = Total Sales / Order Count

Purchase Frequency = Total Orders / Total Customers

Customer Value = Average Order Value x Purchase Frequency

Now,

CLV = Customer Value x (average customer lifespan)

Can customer service be modeled around CLV?

In short, yes. Quality customer service is a necessary investment that helps any business grow. If your customer service is below average, customers are likely to defect to competitors even if your product is of a better quality. The data below reveals that around half of the consumers are likely to switch brands after a single instance of poor customer service.

Thus, it is important to get your customer service strategies right. Good customer service equals good customer experience. In turn, this will make your existing customers more likely to become loyal long-term clients.  

So, a high Customer Lifetime Value means a customer will bring in more revenue for the company. Since each customer becomes more valuable with time, it means that the company can now afford to spend more to acquire new users and retain the existing ones at the same time.

Different studies conclude that good customer support plays a crucial role in customer retention, and the longer a company is able to retain its customers the more is the revenue generated from them. 

But ensuring good customer service has its costs, it requires a lot of infrastructure and manpower. So much that it makes sense for businesses to ration this aspect and optimize the costs associated as much as possible. So, it makes sense for a business with a large number of customers to focus more on its long term users or higher-paying users purely to retain them effectively for longer periods, so as to ensure higher revenues, which in turn enables larger budgets to acquire new users. 

How daton can be helpful in Customer Lifetime Value Calculations?

Daton extracts data from Sales Databases as well as various chat, help desk and other CRM interfaces and loads into a Data Warehouse. The historical data of orders, frequency, price range will be key metrics for in the to calculate the Customers’ Lifetime Value: to determine how much priced possession they are for the Brand. The popular customer services are platforms like Zendesk, Freshdesk, Zohodesk, Intercom are storehouses of rich data which have great potential to be harnessed for the calculation of Customer Lifetime Value and provide effective customer support.

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