How to Find High Value Customers and Retain Them in Your Small Business
In this blog we are going to discuss how to find high value customers and retain them within your small business. Cash flow is king in any business, especially new and small businesses and cash flow comes from a consistent supply of customers who are willing to pay your for your goods and services over a long period of time.
One of the most important growth strategy is client-led growth, acquiring customers to grow the business and in order to do that, businesses will have to master the art of acquiring high value customers and retaining them.
In other words, what a small business needs to do is understand their Customer Lifetime Value and maximise this metric over time.
Introduction: What is Customer Lifetime Value (CLV)?
Customer Lifetime Value (CLV) is the total value of a customer over their lifetime. It is the net present value of all future cash flows that are expected to be derived from that customer.
CLV is an important metric for businesses to measure the value of their customers. CLV measures the longevity of a customer's relationship with a company, and how profitable it has been. It provides insight on the customer's lifetime value to the business over time.
A company's CLV can be calculated by dividing the total revenue generated by that customer during their relationship with the company, by the cost of acquiring them as a customer.
Customer lifetime value can be analysed by looking at these value metrics and customer value index below:
Customer Value Metrics
Revenue per customer - How much revenue does the customer generate
Profit per customer - How much profit does the customer generate
Rate of repurchase from customer - How often does the customer return
Customer Value Index
Total number of purchases over the lifetime of the customer
Average purchase value over the lifetime of the customer
How often the customer makes a purchase in a month, year
The length of the customer relationship
Number of referrals generated by the customer
Customer satisfaction with every sale
As a small business it is important to track and measure these metrics above, to fully understand the lifetime value of the clients, then focus attention and marketing efforts to the customer segments that produce the highest lifetime value.
Marketing Budgets and Cost of Client Acquisition
For example, if you had $100 to spend on a marketing campaign - how would you decide how to spend it? Do you buy Facebook or Google ads, do you invest in cold-calls or cold emails, do you buy a billboard or TV ads. Resources will be limited, how you decide to spend your marketing budget should be informed by the numbers generated from these metrics above.
Understanding the type of clients who offer the highest lifetime value is important, that is where you will want to invest your marketing budget.
Your marketing budget is: cost of acquiring a customer. In order to get the best return on marketing investment, the marketing spend should yield the best overall lifetime revenue.
Tracking your Customer Value Metrics with Skhokho Integrated CRM Software
Small businesses will need to find a reliable way to track their customer value metrics, in order to find high value customers and retain them. Skhokho provides a fully integrated CRM and Project Management software that will allow you to measure and follow up on these metrics.
Skhokho Customer Dashboard
Within the Skhokho Client Dashboard - which can be found on the project management and CRM app, sales personnel can track over time the lifetime value of clients. The can see in total how much revenue certain clients have generated.
Sales CRM Dashboard
These values can be read together with the CRM Hustle details client information to infer the source leads that covert in to high value clients.
When you start measuring values, you gain insights, which you can start acting upon. This is the value of great CRM software. The built in integration with Project Management Software, allows the sales team to continue tracking over time the lifetime value of the leads that converted, to go beyond conversion metrics and to analyse real revenue in to the company.
Creating Sales Targets with Objective Key Results (OKRs) to measure and improve on Customer Value Index
Objective key results on OKRs are the best tool to track and improve on customer value index, as a business you do not just acquire customers and sit and wait for them to make a purchase.
Existing customers and people who have already showed interest in your product are the most likely people to purchase your product again and recommend and refer your product to other potential clients.
Therefore it is crucial that the most important customer value index metric you track be “Customer Satisfaction Score”. You can track this by designing a Customer Satisfaction form that you sent out to your customers and ask them to rate their experience doing business with you.
Create a scoring scale from 1 to 10 on questions like these:
How well did the product/service meet your needs?
How would you rate the value for money of the product?
How would you rate the quality of the product/service you have received?
How likely are you to recommend the product so someone else?
There are more questions, Skhokho is implementing a customer satisfaction survey that will be added to the project management app in the near future, you will be able to select an appropriate survey and send a link to a client to respond.
Once the client has responded, the scores can be then added to an objective key result metric to track. An organisation can have a target of 95% score for example, and every time a client satisfaction survey is completed, the metric updates and that way you can track how well you are doing on achieving the targets.
Getting started with Skhokho Business Management Software
Checkout our documentation here: https://skhokho.io/documentation/guide/
Register for a free 14 Day no credit card required trial here: https://skhokho.io/authentication/register
Read more on Objective Key Results: https://skhokho.io/objective_key_results_okr_software
Read more on CRM Software: https://skhokho.io/crm-sales-management-software-business-development