Running a business is no joke, that’s because there are a lot of elements that go into making a business up and running. Many different departments work together to flourish a business, and even the slightest flaw in the workings of any of those departments can crumble the very foundations on which a particular firm stands.
Although many departments contribute to the working of a business, one such component is quite essential if an organization aims to prosper in the long run, and that is customer service. Customer service is a skill that possesses key importance in sustaining a business over the course of time, and the reason it is able to achieve that goal is through customer retention.
Customer retention should be the ultimate goal for every business which is only possible through good customer service. But why customer retention? That’s because it helps a business to grow tremendously in terms of revenue, brand image, and customer loyalty. So by making an effective customer retention policy, a business can benefit out of other countless avenues.
This isn’t a far-fetched statement as we have case studies of many big brands that have made their names in the business industry, mainly through exceptional customer service. One such example is Xfinity Customer Service. This only became possible through exceptional customer service that resulted in customer retention and an increase in CLTV (Customer Lifetime Value).
Xfinity has a dedicated customer service department that is available to assist customers 24/7. Customers can freely ask for technical assistance and outage information. This multichannel customer support system is one of the reasons why their customer service excels overall and increases customer satisfaction.
Customer satisfaction and CLTV are the terms we have excessively used previously, but what are these exactly? Customer satisfaction is a straightforward term in itself that refers to how happy a customer is with a said product or service offered by a business. The other thing which we discussed was CLTV, and it is quite a crucial component that we’ll discuss in detail below.
What is CLTV and How is it Important for a Business?
CLTV stands for Customer Lifetime Value, it is a metric used to indicate how beneficial a customer has been for a firm in the duration of his business interaction with that particular firm. CLTV is used to measure the monetary benefits that a firm gains from a customer during the entire lifecycle of their business transactions.
We all know this business fact that acquiring a new customer is always more expensive than retaining an existing one. And when a business gets a new customer, it takes at least a year to reach the breakeven point and to recover the cost they spent on acquiring that customer in the first place. So a higher CLTV is crucial to make the business profitable and that depends on two main factors.
Money and Time Factor of CLTV
Customers’ lifetime value is based upon two main factors, the amount of money they spend on a said business and the amount of time they stick to that business. The formula of CLTV also depicts this, as CLTV is calculated as “Customer Value * Customer Average Lifespan”. So the more either of these values is, the more the overall CLTV is. And both these factors can be increased through good customer service.
So this won’t be a farfetched statement to say that CLTV can be increased by providing good customer service, and as CLTV is the main factor behind the growth and good business of a company, it can be clearly inferred that good customer service brings in good business for any company or firm that directly deals with end users.
Factors that Increase CLTV
Since we have already talked about the importance of CLTV, its positive impacts on a business, and the components that it’s made up of. Now let’s talk about how to increase CLTV and make the customers spend more and stay with a company for longer periods of time.
Brand Image
Brand image is everything in today’s market, that’s because consumers have become cautious about spending their hard-earned money and doing experiments with different brands. They usually check out user reviews and settle for a product or service from an organization that has a significant positive vibe in the market.
A brand that has established itself among the consumer market doesn’t need to spend on stuff like marketing, as its brand value is enough to pull the customers. But in order to get to that level is tough, and the only thing that can increase the brand value is providing the best products and services, and most importantly taking care of your customers after they get the product, in simple words, providing good customer service.
Customer Satisfaction
Customers’ happiness and satisfaction with their service provider is the key component in any flourishing business. A happy customer is the one that’ll spend more, thus giving a business more opportunities to upsell. Plus, customers who are satisfied with their service providers tend to be the ones that stick with them in the long run.
More revenue and more business lifespan of customers are the key traits in increasing the CLTV, as discussed above. And both these factors are directly dependent on customer satisfaction which is also ultimately achieved through good customer service.
Responsiveness of the Provider
The apt responses become the make-or-break thing in how your customer perceives you as a business entity. If the user is getting quick and meaningful responses from the service provider, it will automatically create a sense of loyalty in them.
Effective responsiveness in cases of user feedback or in need of any kind of assistance makes the user feel valued and makes them realize that their brand takes heed to their words. Since their brand gives them their worth, this subsequently triggers a sense of loyalty in them. And customers stay where they’re heard and their words hold value.
Summing Up
We hope this article would have summed up a very critical component of the business industry, which is CLTV. We discussed what CLTV is, what it is made of, and how it impacts a business. We also discussed the things that can be done to improve the CLTV of a business.
