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7 Effective Ways To Improve Customer Lifetime Value

20 April, 2023 4 min read
7 Effective Ways To Improve Customer Lifetime Value

In the world of SaaS, customer acquisition is just the first step toward building a successful enterprise. The key to long-term success lies in building customer loyalty and increasing customer lifetime value (CLV).

Customer Lifetime Value is a metric that measures the total value a customer brings to a business over their entire lifespan as a customer. Improving CLV can have a significant impact on a company's bottom line, as it means customers are more likely to stay with the company and continue to purchase its products or services. In this article, we'll explore seven effective strategies that businesses can implement to improve customer lifetime value and drive sustainable growth. Whether you're a small business owner or a seasoned entrepreneur, these tips will help you optimize your customer relationships and maximize their value to your business.

There are various ways to calculate the LTV formula, here is a simple way to do it:

LTV = Customer Value X Average Customer Lifespan

Check out this link for a deeper dive into the LTV formula.

There are two proven and time-tested strategies that you can implement to boost your business growth.

1. Reduce your Customer Acquisition Cost (CAC)

Businessman shaking hands with a customer after acquisition

Customer acquisition costs are crucial since they influence how expensive and eventually lucrative growth will be for your business. Customer acquisition cost (CAC) & LTV are very closely associated and help in determining the health of the business. A company’s growth will lack sustainability if CAC is too high compared to LTV because it will be more expensive to acquire consumers than it will be to profit from each one. The goal of all marketers is to lower CAC (after a certain point in time in the business).

A good CAC: LTV is 3:1, meaning you should make 3x what you spend on acquiring customers.

If you want to read more on CAC & LTV relations, you can check out this article.

2. Improve your Customer Lifetime Value

Man calculating customer lifetime value with coins, official documents and calculator on table

CLV measures the total economic value that a customer brings to your company over their lifetime. This includes both the current value and future value of a customer.

Here’s how it impacts your business growth:

  • Existing customers spend more than new customers
  • Five times less money is spent on retaining current customers than on acquiring new ones
  • Existing customers are more likely to buy

This results in:

  • Faster business conversation
  • More predictable revenue
  • Reduced cost of acquisition

Let's dive deeper into the second strategy and look at ways to improve the customer lifetime value.

7 Ways To Improve Your Customer Lifetime Value

The foundation of improving customer lifetime value is to make your customers stay and return to buy. You must continually demonstrate to them how much value they are deriving from your service or product in order to keep them satisfied and content with it.

Satisfaction + Value = Retention & Expansion

1. Delightful Onboarding

Since onboarding marks the start of the brand-customer relationship, it's crucial to establish a process that is seamless and makes the consumer delighted to activate your product. Remember that the onboarding should be brief and quick but effective.

2. Consistent Customer Training

To ensure that your customer is extracting maximum value from your product you need to focus on getting them trained on low-usage features and also on the new features that you introduce. For this, you need to monitor the usage patterns of your customer. Here is a tool to help you get the ball rolling.

3. Constant Product Updates

There are 2 primary hooks that competitors use against each other:

1) Price

2) Product Features

You must maintain a careful watch on your customers' changing wants in the present SaaS landscape. Taking feedback and acting upon them is critical. You must enhance your product in light of your insights if you want to consistently provide value to your customers.

4. Offer Lucrative Pricing

As previously stated, price is a crucial aspect of customer retention. To maintain their interest and loyalty, it is necessary to provide enticing offers. A recommended strategy is to enhance the annual plan, which can encourage customers to make long-term commitments.

5. Create a Community

While it is true that a customer is initially drawn to your business because of its product offerings, establishing a strong relationship with them can further solidify their loyalty. To enhance this connection, consider creating a community for your customers to become more engaged and connected with your brand as a whole. By doing so, you can foster a sense of belonging and encourage their ongoing participation.

6. Apply an expansion revenue plan

To maximize revenue, it is important to not only focus on customer retention but also to increase their commitment to your product. To achieve this, it is crucial to develop a personalized plan for each customer that assesses their potential for revenue expansion. This strategy can help you identify and target areas for growth while strengthening the customer's commitment to your brand.

7. Collect Customer Feedback

In addition to selling your product, it is important to evaluate customer satisfaction. Gathering feedback can be achieved through various methods such as implementing automated NPS or CSAT surveys. However, it is equally important to take action based on the results of these surveys to address any concerns and improve the overall customer experience.

And, that’s a wrap!

CLV should not be regarded as a short-term or one-time endeavor, but rather a continuous effort to achieve long-term results. Businesses must prioritize the success of their customers and cultivate a customer-first mindset, regardless of the company's size or stage of development. Remember, enhancing Customer Lifetime Value is not a tactical maneuver, but rather a strategic approach.


Author profile image
Wilson Lobo

Wilson is an experienced marketer with a demonstrated history of working in marketing and advertising space across 17 countries. He specializes in B2B brand building.

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