How to Master the Optimization of Customer Value

9 mins read
How to Master the Optimization of Customer Value
How to Master the Optimization of Customer Value

Customer Value Optimization(CVO) is a process for creating a great customer journey and maximizing ROI from all marketing activities. 

Focusing on the entire customer journey – not just acquisition – and improving every step along the way, customers continue to buy from you now and into the future. There is also a need to tweak the traditional growth formula.

So how do you calculate customer value? You can’t fix everything at once, but focus on the steps you know are the most underperforming. For example, you may already have the data or research on the person, for example, but just haven’t put it to work yet.

Getting a small payout or two can give you the support and resources to go through the process from start to finish.

1. Change the way your business defines “success”.

Every business has its own unique and creative ways of measuring ‘success’. The key is not to get bogged down in short-term statistics at the expense of long term growth.

Your earnings may look great in P&L, but if you ignore customer feedback (qualitative data) or customer retention KPIs (quantitative data) into consideration, you may be faced with a rude awakening several months from now.

Customer value is not a marketing KPI, but a measure of business-wide success. The first step in understanding customer value is to identify the impact of customer retention and stressing the importance to your company’s employees (for example, through a workshop).

2. Monitor the CLV and the KPIs that affect it.

Customer lifetime value is first and foremost, influenced by factors that are your KPIs:

  • RFM distribution;
  • Margin;
  • Customer experience (product reviews, promoter’s net score, customer effort score, etc.);
  • Customer loyalty rate;
  • New stickiness from customers.

Conform yourself to assessing customers to find out who your most valuable customers are and how their needs change in a short span of time. This allows you to target specific customer groups based on their behavior and thereby generate higher response rates, increased loyalty and better lifetime customer value.

Margin

Additionally, RFM analysis reveals customer anomalies highlighting the most important customer groups (taking into account CAC and margin).

Client experience

It is said that the customer experience is quite difficult to measure; However, some KPIs can provide clarification:

Product Reviews

Take note of the positive and negative feedback you receive from product reviews.

Net Promoter Score (NPS)

If you activate an NPS pre-delivery and post-delivery survey, you will see where your customers are happy (or not) with your product or service. (However, know the limitations of the NPS.)

Customer effort score

How difficult is it for a client to use the product, find information, or solve a problem? The customer engagement score says so.

Resolution rate

How effectively does your support team resolve customer issues? Are most of your customers satisfied with the support you offer? Is there room for improvement?

Product return

A high return rate for products can mean that there is a problem with your products or that you have not explained your product or service properly.

Customer retention rate

Periodic calculation of the loyalty rate helps you understand whether you are effectively nurturing your customers effectively or if you are targeting the right people in your campaigns.

New Customers stickiness

A thorough analysis of your email marketing campaigns can find out which campaigns have brought you to repeat business instead of one-time purchases. It is an essential customer acquisition relationship that every e-commerce business should be watching.

3. Conduct qualitative research for each RFM group.

Once you have the RFM groups, you will better understand your customer distribution. However, it can be difficult to know why some customers are more valuable than the rest.

Thus, this is where qualitative research comes in – to uncover the reasons and barriers associated with buying through surveys and customer interviews.

For each RFM group, ask a set of questions, starting with demographics, reasons to buy, NPS, barriers, reasons not to return, and other questions tailored to your business case and goals.

Product issues vs Service issues. 

You can send the surveys by email; however, for small RFM groups, you can opt for live interviews (face-to-face, telephone, Zoom, etc.).

4. Look for customer discrepancies in quantitative data.

Deviations give you hints as to what sets a particular group apart from others, and allow you to discover toxic brands or categories, locations with loyal customers, and more.

Are your best customers located in a specific geographic area? Are they mainly in an industry where you neglected to market?

5. Define your ideal customer profile (ICP) through segmentation and RFM analysis.

After introducing RFM and discovering your best customers, identify your ideal customer profile (ICP) by mixing the quantitative and qualitative data that you have collected along with the buying patterns from the RFM analysis.

When creating your ICP, keep the following in mind:

  • Who they are (location, sex, age);
  • When to purchase (shopping habits);
  • What they buy (deviations in the product range);
  • What drives them to return (reasons and obstacles);
  • What more they need (qualitative research).
  • This process reveals opportunities for optimization:

Better ad targeting and lower CAC by focusing on specific products and recommendations on the brand or in specific regions for a particular RFM customer.

Better assortment and merchandising based on what RFM groups buy and optimization of stocks (reduction of stocks on less popular products).

Better customer service by providing priority support, better response rates or tailor-made return programs to the customers that matter most.

6. Optimize the mapping of the customer journey.

At this point in the process, you can finally examine your holistic business and marketing goals and analyze the customer journey by mapping touchpoints (as they currently are) and every interaction a customer has with your business as well as the services.)

You can determine what is working and what needs to be improved.

7. Development of the conservation strategy

Once you have mapped out all touch points and characteristics, it is time to create the perfect customer journey based on your research.

And true enough, we apply ideal customer outcomes throughout the journey to create an endless loop that drives conversions and supports repeat orders – almost on autopilot.

You can do this by:

Provide better customer service for the best customers;

Acquisition of multiple clients such as the ICP (personalized and similar audiences);

Create a better assortment of products;

Set up better nurturing campaigns (email, ads, SMS, website personalization).

Now, we associate specific enhancements with customer lifecycle stages.

Types of campaigns 

  • The phase of need

This phase, the beginning of the customer journey—covers your general marketing efforts. You generate a “need” by focusing on lead generation campaigns.

Think about Google Ads, social media and even the text on your website. Do potential customers know why your products or services are meeting their needs?

  • The research phase

The step is to reduce your focus and include campaigns specifically designed to help you with placement and re-engagement. How can you help those who need to find the right solution among your products and services?

Use your mailing list and social media channels to showcase specific products based on your ICP.

Geoff Moore

Moore is a full-time blogger and works part-time as a college instructor in Business Administration. His articles were featured in several magazines and online blogs.

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