5 Steps To Optimizing The Lifetime Value Of Customers
by Sara Sutton
Customer loyalty directly improves the bottom line by increasing the lifetime value of each customer.This is true in any industry, but particularly in those where the customer will interact with the brand (and its agents) over and over, such as in healthcare, insurance, financial services, travel, etc.
For example, when was the last time you purchased or renewed insurance (e.g., auto, home, health, life)? Since insurance renewals generally occur at least once a year (if not more often) for most insurance types, odds are you (and most other adults in the United States) may be faced with insurance decisions in 2021.
Insurance is a necessary product, but not necessarily a fun one, at least in the eyes of the consumer. That is, many consumers dislike shopping for insurance, finding it complex, confusing, and stressful. In addition, these decisions tend to be higher-ticket or more expensive products. This tends to make the experience more personal to the customer (versus some other lower-impact or lower-engagement categories), so great experiences can pay big dividends in terms of customer value.
Thus, industries with high customer interaction are examples of industries in which gauging satisfaction and working to improve and optimize the customer experience—across many touchpoints and over time—is essential to building (and keeping) loyalty to the brand and, therefore, maximizing lifetime customer value to the business.
Think about the following steps when optimizing the customer experience (and thus, the lifetime value of your customers).
- Discover or Rediscover Customer Needs: Don’t assume you know what consumers want. Even if you have conducted research in the past, successful leaders understand that they cannot rely on yesterday’s data to drive tomorrow’s growth. Competitive forces also bring ongoing change. So, if you are planning big changes, or if time has passed since you have last assessed the market landscape or consumers’ needs, work to rediscover them.
- Conduct and Utilize Market Segmentation: Not every consumer wants or needs the same things. Ensure you fully understand your customers and are meeting their specific needs. Market segmentation is a useful tool to learn about consumers and assess how you can engage with them on their own terms. For example, in the healthcare industry, there are likely to be differences between individual, group, and Medicare consumers, as well as different needs or preferences based on demographics, current behaviors, and/or attitudes. Understanding these differences allows you to offer the right products or solutions to the right group, with the right frequency and the right messages. It also allows you to optimize your pricing strategy by understanding the value that different customer groups place on different product and service elements.
- Assess All Customer Touch Points: Each touchpoint has the ability to impact customer experience, so each one should be evaluated. Touchpoints may include a website, an app, a call center, chat bots, a rewards program, brick-and-mortar or point-of-sale personnel, and/or print material, to name a few. Evaluating touchpoints also includes assessing the impact of the policies and programs that your customers must interact with, and how empowered the personnel at different touch points are to help the customer with any issues.
- Empower Your Employees: Involve your employees by having them take an active role in optimizing the customer experience. Frontline employees have the most interaction with customers and, therefore, have the largest impact on the customer experience. Ensuring employees take an active role in optimizing the experience requires effective training, goal setting, listening to employees (such as with anonymous employee surveys conducted by a third-party research company to ensure honest feedback), and recognizing and rewarding employees.
- Fuel Innovation Based on Pain Points: Tap into pain points and use them as an innovation advantage. Both current customers and non-customers are a great source of knowledge and ideas that should be tapped regularly to identify pain points. Customers can tell you what is working well and what isn’t. Non-customers can tell you why they aren’t using your products or services. Although pain points can be drawn from social listening, directed marketing research (either qualitative or quantitative) is the best way to routinely and reliably identify pain points for innovation and improvement.
Evaluating and, if needed, revamping the customer experience should be cyclical. The landscape changes more and more quickly than ever before. Optimization cannot be a one-and-done action; it must be a continuous strategy. That is, even if you think things are going well, steps can likely be taken to further optimize the customer experience and continue building loyalty (and lifetime value).
From qualitative investigations to tracking studies, the goal of customer experience optimization research is to maximize the loyalty and lifetime value of your customers, leading to improved long-term profitability. Onward and upward!
About the Author
Sara Sutton (firstname.lastname@example.org) is a Senior Vice President. She may be reached at 1-800-262-5974 or 1-817-640-6166.
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