In my first blog in this series, I discussed why field service management businesses are ideally positioned to increase customer lifetime value (CLV) by transforming their customer service and customer interactions. In this blog, I’m going to go through the 4 key drivers of CLV which we believe can dramatically change the game for field service management businesses.
The challenge of defining customer lifetime value
Customer lifetime value is a top-level metric. And while it’s centred primarily on exceptional customer experience, it’s an outcome of many factors working together consistently over a period of time. And that makes it a big challenge for a business to define and get a grip on.
We’ve seen organisations get drowned in the nitty-gritty of how to calculate CLV. And as a result, CLV improvement programmes are often perceived as more complicated than they really are.
Improving CLV is very important to field service management businesses, so they need to have pragmatic and workable approaches to achieve this. I believe breaking down CLV into its constituent factors and then mapping simple relationships between these factors and CLV makes it much easier and more intuitive to create a workable plan.
For the purpose of this article, let’s call these constituents ‘CLV drivers’. The thought process here is that if a business can improve these drivers, CLV increases automatically. But importantly, you need to continuously track and work on these drivers to maintain and improve CLV on an ongoing basis.
So what are these drivers? Let’s take a look…
Driver #1: Cross-sell and up-sell
A significant part of the value that customers bring to your business is directly created from the products and services they buy from you. So it stands to reason that increasing the sales volumes with every customer directly increases the average CLV.
Apart from the initial product sales, sales revenue per customer can be increased by selling appropriate product-attached services like warranties, and any ancillary products to complement the main product. This means a cross-sell and up-sell programme is one of the most obvious, but important, channels to create increased customer lifetime value over a period of time.
What does this mean for you? Well, field service management businesses should create specific customer personas and segments with tailored ancillary products and associated services for the specific needs of each. These simple techniques will encourage individual customers to spend more with you, driving up CLV.
Driver #2: Customer advocacy and referrals
If you’ve followed the advice in my first blog and really doubled down on great customer service, you’ll likely have some happy customers on your hands. And happy customers are also your best brand advocates.
Field service management businesses should look to harvest the goodwill of satisfied customers beyond recommendations to their close circle of friends and family. Ideally, you want them shouting about how great you are to the wider community and their social networks.
Getting new referrals from your existing customer base is the most efficient way to generate leads and acquire customers, as it cuts down the number of long marketing and sales campaigns you need to carry out. So an existing customer can be far greater than his or her individual purchase value and can help improve average CLV by expanding and increasing your customer and sales base.
Driver #3: Repeat purchases and renewals
. Cross-sell and up-sell opportunities aren’t the only way to increase how much a customer spends with you. Repeat purchase and renewals of your main product(s) are also vital, and perhaps even more impactful in increasing CLV.
It’s often possible to spot the opportunity for repeat purchases after the initial sale. For example, if a customer buys an air conditioning unit for one room in their house, they may well feel the benefit and quickly look to install one in another room. This is particularly likely to happen if they’ve already received good customer service and you have appropriate deals available especially for ‘existing customers’.
Another instance of repeat purchase is specifically triggered by the need to replace a product that’s come to the end of its ‘shelf life’. Customers who’ve bought your product and gone on to enjoy both great customer service and an excellent product should be the easiest to convince to replace their current product for your latest model.
Renewals are also a repeat purchase in a way, but in this case, it is for a service or maintenance contract that’s coming to an end and need to be extended.
When existing customers repeat their purchase of your main high-value products (and don’t switch brands at this crucial decision time), it’s a surefire way to bring about an impressive increase in average CLV.
Driver #4: Cost to serve
You might not intuitively think of cost to serve when considering CLV, but it can actually be an important contributor. No matter how many products you’re able to sell to a customer and however great the service is that you provide, if your processes are not efficient, optimised and flexible, the cost of serving the existing customer set will eat into your margins and profits. And this can make it difficult to sustain a superior level of service.
In order to maintain excellent customer experience levels for existing customers, as well as scale up and down due to business acquisitions or seasonality, your service processes need to be optimised and elastic.
As a matter of fact, the service systems and processes must strive to continually reduce the overall cost to serve while making sure that the customer experience does not take a hit. This will ensure each customer sees a definite benefit in having all their product and service needs taken care of by your business, while also increasing the average CLV for you.
How do you work on these drivers?
I believe the above four drivers hold the biggest potential to turn around the traditionally complex approach to defining and improving CLV. To address all four requires a holistic and long term mindset, as well as enriched skillsets for your contact centre agent and field service technician teams. Fortunately, neither requires lots of manual or traditional processes nor a long drawn out and complicated IT programme.
In the rest of this blog series, I’ll be discussing modern, simple ways to tap into each of these four drivers. Importantly, I’ll also be looking at how today’s technology can provide essential capabilities for your contact centre agents and field service technicians to boost revenue generation and CLV improvement. Stay tuned.