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How to improve customer lifetime value with exceptional experiences

Tara DeZao, Log in to subscribe to the Blog

How to improve customer lifetime value with exceptional experiences

Arguably the most well-known measurement of customer loyalty is a brand’s Net Promoter Score (NPS). Gartner says the following about NPS: “A KPI used to assess overall customer satisfaction and how likely customers are to recommend a company to a peer or colleague derive from a single question: ‘How likely is it that you would recommend our offering (product, service, or company) to a friend or colleague?’” In this definition, however, we see a critical word: satisfaction. Customer loyalty and customer satisfaction are not interchangeable. Satisfaction is a snapshot of a moment in time. As a customer, I can be satisfied by an experience momentarily but still churn from that brand. Loyalty, however, is about more than a moment; it’s about a relationship. A long-term customer/brand relationship cannot be measured by NPS scores. Loyalty requires being measured over a period – and the best metric to determine that is customer lifetime value (CLV).

What is CLV?

CLV is a measure of the total value a customer brings to your business over the entire duration of their relationship with you. Brands who can continuously increase CLV will have a healthier long-term growth rate. It’s a sign that an organization has earned consumer trust and created a relationship that isn’t just based on short-term sales. A high CLV reflects that a brand has invested in retaining and nurturing customers, not just selling to or acquiring them.

How to calculate CLV

Calculating CLV involves a formula that considers the average purchase value, the frequency of purchases, and the average customer lifespan. This formula provides a quantitative understanding of the worth of each customer, guiding businesses in making informed decisions about costs associated with the customer lifecycle like acquisition and retention mentioned above. The goal? Over the span of the relationship, the customer invests more in your brand than the brand needed to invest to nurture and retain them.

How to achieve stellar customer lifetime values

Given CLV is a multi-dimensional measurement, a strategy for creating strong CLV requires several elements working together to add up to a total customer experience.

  • Deliver exceptional customer service: As mentioned above, customer satisfaction is an important component of loyalty and repeat business. Exceptional service leads to better customer satisfaction, which includes customer support, a friendly user experience, and a proactive approach to service to identify issues before they become actual problems.
  • Hyper-personalize customer experiences: Personalization enhances customer engagement and increases the likelihood of repeat purchases. Consumers now demand personalized experiences that are not just relevant to them, but perfectly timed and in the channel they prefer. AI-powered personalization leverages data signals on a consumer’s preferences, behaviors, purchases, and beyond to make the experience as tailored as possible to the customer’s needs and wants in real time. Customers actually welcome this type of engagement as long as it demonstrates respect for consumer privacy.
  • Incentivize customer loyalty: Loyalty programs are not a new phenomenon, but making sure that your loyalty programs are able to incentivize customer loyalty will make your programs stick. Programs like discounts, exclusive offers, or early access to new products will help keep customers coming back. Make sure that these programs can tailor offers to specific customer needs – for example, make sure that the discount or exclusive offer matches the products that the customer is in-market for.
  • Feedback and improvement: Regularly seeking and acting on customer feedback demonstrates commitment to continuous improvement and customer satisfaction. Being able to access this feedback across functional areas of the organization is paramount so that frontline employees can integrate this into their customer interactions.
  • Social proof: Encourage those with positive feedback to share their experiences via social media and other platforms. There’s nothing as powerful as user endorsements; they add credibility to a brand’s claims that their products are worth buying. And in our hyper-connected world, social has the power to send reviews viral.
  • Customer education: Educating customers about product usage, benefits, and updates enhances their experience and encourages deeper engagement with the brand. Every interaction we have with customers shouldn’t be sales focused. This is also one way that a brand can demonstrate empathy, by making the user experience valuable even if they aren’t going to make an immediate sale. It shows a commitment to a long-term relationship and that the brand wants the consumer to derive value from the product or service they spent their hard-earned money on.
  • Build communities: Building a community around your brand, such as through online forums, social media groups, or events, can deepen customer engagement and loyalty. A strong community fosters a sense of belonging and can create raving fans and brand advocates out of existing customers. Brand advocates are much more likely to make repeat purchases or recommend your products to their networks.

Customers benefit from personalized, high-quality experiences and a sense of belonging, while businesses enjoy increased loyalty and revenue. Aligning to customer lifetime value as a success KPI will validate that customers are getting their needs met as well as the business. It’s a relationship measurement and it says more about how your customers feel about you than clickthrough rate ever will.

Just ask Natwest Group. NatWest set out to reimagine the customer experience, drive revenue growth, and reduce risk through digital transformation. Recognizing the potential of AI to automate decision-making, the bank invested in Pega Customer Decision Hub™. Customer Decision Hub can analyze billions of data points to determine the right course of action – creating timely, relevant conversations with customers based on their specific journeys and needs. By using Customer Decision Hub, NatWest created an always-on brain that unifies 33 channels across three franchises and offers up next-best-action recommendations for 19 million customers. Watch this video to learn more about how they maximize customer lifetime value in every interaction.

Keep learning about CLV

Building long-term customer relationships is more important than ever before. For customer engagement and marketing practitioners, delivering personalized customer experiences is a critical component of that process. Read “Revolutionizing Personalization with Artificial Intelligence” to learn more about how to achieve healthier customer lifetime values with personalized customer experiences.


Industry: Cross-Industry Product Area: Customer Decision Hub Solution Area: Customer Engagement

About the Author

Tara DeZao, Pega’s Product Marketing Director for AdTech and MarTech, helps some of the world’s largest brands make better decisions and get work done with real-time AI and intelligent automation.

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