How many products can the average salesperson keep in their head while they are making reccomendations to customers? You will be shocked to find on average it is only 8. What if 8 isn’t enough? What if you have more than 8? What if you have twice that? Ten times that?
If you have more than 8 products, when a member of your sales team calls on a current client, they only recommend the products that they are most familiar with. You have provided them an entire playbook, and they use only a tiny fraction. Unless, those 8 products just happen to be the correct product for a customer, your sales staff just put a client into the wrong product. They assumed that everyone was like them.
Think about that for a second. The whole point of cross-sell is to keep your clients happy and purchasing from you. Matching the wrong product with the wrong person means reduced satisfaction, frustration, and loss of loyalty. On the balance sheet, you are losing income, not maximizing profitability, and your salespeople are misusing their time. How do you improve this? (more…)
All posts tagged: Customer Lifetime Value
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8 isn't enough. Why you need a better sales system.
Why Customer Segmentation Analysis is Essential
Customer segmentation analysis is essential. No company has just one type of customer. Customer segmentation analysis allows you and your data to capture this reality. Capturing reality is a pre-requisite to using data to make decisions. Each customer segment needs to be understood, marketed to, and tracked. Download our case study.
It is time to stop thinking about your “customer” and start thinking about your “customers”. Don’t let your marketing and customer metrics, hide valuable facts and insight in aggregated data and averages. The next level of marketing analytics is to calculate and track metrics for each customer segment. Customer segmentation provides you a window through which to understand why people do what they do. This gives you enormous power when trying to improve customer lifetime value, increase customer loyalty, reduce the cost of customer acquisition.
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How to Increase Customer Lifetime Value
While many business make substantial investments to improve customer acquisition, they often fail to invest in improving their customer lifetime value. Customer lifetime value is the average monthly net profit per customer divided by the monthly churn rate. Learn how to calculate customer lifetime value here. Companies can increase customer lifetime value by making investments to improve customer loyalty, crossing selling, and up-selling.
Improving customer loyalty, reducing customer churn, allows you to increase net new sales. Net new sales = # of New Customers – Customer Churn. Your sales and marketing teams work hard to bring in new customers, and customer churn erodes their efforts. Fortunately, improving customer loyalty and reducing customer churn, increases the return on investment from customer acquisition, improving your customer lifetime value.
To reduce customer churn, you need to know each of your customers. You need to know who is most likely to leave and why. Knowing who is most likely to leave allows you to contact them before they leave. Knowing why people leave, allows you to fix your systems. The who is a short-term fix, the why is a long-term fix. For small companies, knowing the who and why might be obvious. However, for companies with thousands or millions of customers this becomes very difficult.
Let’s look at the impact of increasing customer loyalty on revenue. (more…)
How to Calculate Customer Lifetime Value and Cost of Customer Acquisition
While it is important to focus on new client acquisition, it is equally and perhaps more important to focus on improving your relationships with your current customers. This will help you improve your customer lifetime value. Customer lifetime value is the amount of net profit you receive from each customer. As a general rule, the average customer lifetime value needs to be 3 to 5 times the average cost to acquire a customer.
Improving customer lifetime value will help you have a sustainable and profitable business. To stay in business, the net profit from each customer has to be more than the cost to acquire each customer.
Customer Lifetime Value is the average net profit that can be attributed to a company’s entire relationship with a customer. (more…)
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