4 Ways to Use CLV to Grow Your Business

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Customer Lifetime Value (CLV) gives you valuable insights into the predicted net profit of a customer and allows you to decide how much you’re willing to spend in order to keep that customer relationship.

The lifetime value of a customer can be defined by the following equation:

(Average value of a sale) x (Number of repeat transactions) x (Average retention time in months or years for the average customer)

Now let’s say you’re running a Health Food business. The average amount of times a customer makes a purchase is once per month, it costs them $99 per month, they have been a loyal customer for 3 years. The lifetime value of a customer would be $3,564 ($99 average sale x 12 repeat transactions x three years average customer). Therefore a business owner has to spend less than $1,188 per year retaining that customer in order for them to be profitable (this may vary depending on profit margins).

So how can you use this CLV data?
When you understand CLV, business managers and marketers can use the information to make decisions that will help grow their business and generate more revenue, and who doesn’t want more revenue?

Focus Your Marketing Efforts For Higher Return

Knowing specifically which customer groups to focus your marketing efforts on can be tricky. Are you better off investing in your prospects, your current general client base, or those who are dormant in your business?

Answer: None of the above! You should be focusing on your high CLV group.

It’s well known in the business world that a minority of customers often account for the majority of revenue. Research finds that on average 56% of total revenue comes from 14% of shoppers. What makes this small group unique is that they all regularly shop with the business. This is in comparison to the 86% of occasional shoppers who only contribute to 44% of revenue.

Insights like this can help a business develop their marketing toward their high CLV group and ensure that these shoppers remain loyal and provide the highest possible value to your business.

Reduce Customer losses

Knowing the amount of customers who have left your business within a given timeframe and understanding why they left are key components of business growth. You can increase your retention rate by understanding your CLV and who specifically to target your efforts toward. CLV can also help you predict and analyse your rate, allowing you to create strategies to reduce potential customer loss.

Think about whether the customer is worth retaining. Be aware that a customer win-back often amounts to a higher CLV on a customer’s second cycle with the business. We all know that a customer who has left and then returned has a deeper understanding of the value you provide them.

Improve Your Customer Service

Keeping customers happy is of the utmost importance for any business. Without happy and satisfied customers, repeat business will be non-existent.
It’s most profitable to target high levels of service to customers who have the highest CLV. Keep them happy and they’ll likely spend more with your business.
Invite them to special events, install a loyalty system i.e. discounts, personal shopping, or other types of special service. This may seem an obvious step, but you need to ensure they receive value from shopping with you.

Furthermore, knowing the CLV score of each customer will allow your customer service/sales team to handle complaints better. For example, a customer with a low CLV calls in to complain about a recent experience with your business. Is it worth the time and energy to investigate the problem to the 9th degree? Probably not. Make sure the customer leaves happy but don’t waste resources chasing an already sinking ship.

Reduce the Effect of Competitors

Working towards a higher CLV can make a business less susceptible to attacks from competitors. People might try and copy your products but if customer/brand loyalty is present, other businesses will be put off trying to steal customers away from you and if they do try, you can rest easy that your loyal customer will probably become of even more value to you.

Not every customer is equal.
Some customers are worth more to a business than others. Measuring and understanding CLV will ensure that your company is able to recognise the customers who are valuable. This will start a shift in focus toward finding and retaining more of this type of customers and leaving those who are less profitable behind.

If you don’t have a clear understanding of your customers, how are you going to gear your business toward them and increase revenue? The success of a business hinges on CLV metrics and can give you a head start in your marketing, retention, customer service, and competitor analysis efforts.

Want to learn more about your customers, how to ensure they are a value to your business and how you can get more brand loyal customers? Give Natalie a call or email natalie@whatevermarketing.co.nz for a free consultation, she may even bring homemade cookies and coffee.

The Problem with Brand Positioning

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So you have a brand position? That’s great.

A brand position is defined as the conceptual place you want your brand to own in the target consumer’s mind.

The problem with this is, just because you tell someone your brand position, they will still make their own decision about where your brand is positioned in their mind. If you want your brand position to stick, you can’t just say it, you need to show it and more importantly, your target consumer needs to feel it.

If your brand says it is completely customisable, you better make sure there are more options than just colour. If your brand says quickest delivery, you better ensure 7-10 working days is nowhere to be seen. And if your brand says ‘safe and secure’, you better have the test results to back it up.

A successful brand position is all about the follow through.

A successful brand position starts from the top down, with management all the way through your organisation, to every touch point a customer has with your brand. These touch points take the form of taglines and slogans and brand personality in advertising, website, store displays, packaging, customer service, your employees and much more.

Does your target consumer even value your brand position?

Beware of assuming you know what your customers want. For example, it’s easy to think that all consumers value price. Everyone wants cheap, right?

What if your brand sells car seats for babies? ‘Cheapest on the market’ probably wouldn’t be the wisest positioning. Although price is a factor, when it comes down to it, most consumers value other factors much higher than price. Find out what these other factors are for your customers by asking them! Thinking you know your customers’ values better than they know themselves, can be a very costly mistake. Understand your audience, consider their needs and reflect this in your offering.

Ensuring your brand position aligns with your target customers’ values will make all the difference to your brand’s success.

So what if you’re thinking that your brand position may not be that great?

Defining a great brand position can be tricky. It can be even trickier doing so from the inside out. Your emotional investment will inevitably bias your judgement about the position of your business. Although it’s recommended to engage some outside help to define your brand’s positioning, here are some questions to kickstart the thought process:

Who are your target customers?
What do your target customers value?
Who are your direct competitors?
What makes your offering unique compared to your competitors?
What now?

Don’t make the mistake of just simply checking ‘brand positioning’ off the to-do list. Take the opportunity to really make an impact and your brand will thank you for it.

Whatever Marketing specialises in helping large and small businesses define great brand positions. Should you need assistance with discovering your brand’s position, flick us an email at hello@whatevermarketing.co.nz.

5 Web Design Rules to Make your Customers Happy

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Sometimes you visit a website and it just feels right. Other times you visit a website something is not right. If asked what it was about these sites that made them pleasant or unpleasant, it is often difficult to pinpoint.

Well folks, this is the difference between a well designed user experience and a poorly designed user experience. User experience is critical to web design and much careful planning and consideration is given to every web design to make it a pleasant experience for the user. There are so many user experience aspects, both large and small, that we consider when designing a website. Sometimes it can be tempting to want to add in additional paragraphs, make the logo bigger and include tonnes of information, but often these ideas can actually hinder the user’s experience. Here’s five simple ways you can ensure visitors to your website are having a great experience, without them even knowing why!

1. White Space is your Friend!

Our customers tend to feel that they are being cheated when they see white space. They want the best bang for their buck, don’t we all? And white space on their website looks like the unused space in their Chinese smorgasbord container. However in web design, white space is like air and content needs air to breathe. If you fill in all the space, your content is suffocated. Eyetrack III have found that white space is essential for reading comprehension, as white space makes it easier for the user to read the content and also easier to digest and understand this information.

2. Give the People What They Want

Naturally, our customers know a lot about their businesses, where it is, how people should get in contact with them and all the great things that they do. This is why it can be easy to overlook these details on your own website as inconsequential, but from a user’s perspective, these details are often precisely what they’re looking for. Don’t fall in the trap of overlooking what is important to your customers. Ensure you understand what information they are looking for and make it readily available for them.
Source: xkcd

3. Too Many Choices

The effect of having too much choice was studied by Columbia University. Two stalls of jam were set up in a supermarket, one with 6 flavours and one with 24. The results of the experiment showed that even though the second stand looked more impressive, only 3% of customers bought jam from this stall compared with the 30% of customers who purchased jam from the first stand with 6 flavours. It can seem like a great idea to offer your customers lots of pages, buttons and products to choose from but customers are bombarded with options all day everyday. Making decisions can become tiring and overwhelming very quickly. Customers prefer to take their time to make purchasing decisions but they’re also impatient. Simplify the number of decisions for your customers to make and you will reduce the chances of them deciding to ‘finish this later’ (AKA never). Make it easy by hiding or removing unnecessary content.

4. Use Brighter, Bolder and More Concise Headings

Headings are the most viewed part of websites and this is because they give the user cues about the content underneath. Users want to know quickly whether or not they’re in the right place and whether you have what they are looking for. Using large, concise headings at the top of your page, and also throughout your website will greatly improve the user’s experience by not wasting their time. There’s no need to be afraid of large headings! A recent trend towards larger text sizes in web design means a big win for user experience.

5. Testimonials Build Trust

Customers want to trust you and social proof is a great way to prove yourself and your products or services are trustworthy. Showcasing reviews and testimonials from your current customers can encourage potential customers to trust you too. There are lots of opportunities to include social proof on your website such as including testimonials throughout the site, product reviews on product pages and incorporating social media feeds and reviews. Just remember to include social proof after you have introduced yourself or your product, as this is the point where it matters most to make a positive impact.

So now you know! Five simple ways to improve the user experience on your own website. Avoid making common business website mistakes by keeping your customer in mind at all times.

Alternatively, let us transform your website into your customer’s dream website and generate more business, by letting us demonstrate our web design and user experience knowledge and expertise.

Article inspired by Help Scout

Is Internal Brand Culture Damaging your Business?

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Disengaged Staff MemberYour brand is your culture, your culture is your brand.

Already this year, we have engaged with a number of brands and in doing so, we become quite closely acquainted with each brand’s business culture. Most of these brand cultures are an absolute privilege to experience; these are the ones in which the CEOs, owners and managers recognise that their business’ success is integral to and dependent on all people involved.

Some other brands we have encountered have left me wondering; “Why on earth would anyone want to work for this company?” These businesses are the reason why a recent employee engagement survey revealed that only 24% of New Zealand’s employees feel engaged at work (NZ Herald, March 2014). While this is higher than the international average of 13%, this is a terrible statistic. The impact that staff disengagement has on a business’ bottom line is significant; what kind of experience do you think your customer receives when your own employees do not feel valued or see the value of the brand they work for? I have seen companies increase their bottom line by 10-15% just by addressing the internal culture of their organisation.

A business colleague mentioned a quote that says it all, during a discussion on this topic last week: “Blight never does good to a tree, & if a blight kill not a tree but it still bear fruit, let none say that the fruit was in consequence of the blight” by William Blake.

So is your brand’s internal brand culture damaging your business? A few quick clues there may be trouble in the ranks:

  • Always fighting the price war
  • Product or service quality issues
  • Sick days higher than average
  • Resistance to change
  • Lack of cohesion

If one or more of these describe your business, your brand’s internal culture is probably damaging your business and this is caused by ‘cultural entropy’ (the amount of energy consumed in unproductive work and a lack of order or predictability). Cultural entropy happens when there is conflict, friction and frustration that exists within an organisation.

Addressing organisational and brand culture issues such as the following can make a huge return on investment:

  • Factors that slow the organisation down and prevent rapid decision-making, such as hierarchy, bureaucracy, and confusion.
  • Conflict and friction between employees, such as internal competition, blame, and intimidation.
  • Matters that prevent employees from doing their job and expressing their talents, such as control, fire-fighting, and micromanagement.

Engaged employees will go that extra mile, work with passion, and feel a profound connection to their company, they will drive innovation and move your business forward. Disengaged employees are not only unhappy at work, but they are intent on acting out their unhappiness by monopolising managers’ time and driving away customers. Disengaged employees can be difficult to spot as they likely do just enough to fulfil their job requirements. Turning disengaged employees into engaged employees by valuing employees and offering an improved brand culture is perhaps the greatest untapped opportunity for businesses to improve their performance and profitability. Except from Five Ways to Improve Employee Engagement Now, Gallup, January 2014.

Are you part of a great brand culture and workplace or you know of a company actively improving its brand culture, please share your experience with us. We’d love to hear how companies are improving their internal brand culture and increasing their internal brand value through staff engagement.

Is design a waste of money or an investment?

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I’m sure that we have all seen things and gone “Wow, that looks amazing!” as for some unknown reason, the image or object has resonated with us. Symbols, shapes and colours have a powerful influence on us, whether we realise it or not. It is said that a picture is worth a thousand words, and there is the value of design.

With the world moving so fast, there is little time to sit down and work out what someone it trying to tell us, so instead we look for clues in a design, so we can decide to continue reading or move on. It has to be acknowledged that sometimes a picture alone will not convey a full message and that is why supporting text, symbols and graphic elements are required to flesh out the story. Sometimes all information and clues are present, but their structure and placement doesn’t reflect their importance, and therefore the value message is lost on the audience. It is at this point that the ability to WOW an audience visually can decide the difference between them seeking more or turning the page.

From the beginning of time, humans have been trained to sort visual clues, opportunities and threats around us. This skill has been refined, as the competition for our attention has increased. When all elements are organised in accordance with our natural search patterns, the uptake of information is quicker, sparking interest or not. The discipline of design is about presenting something functionally while portraying it in a visually pleasing manner that reflects its purpose.

Do I have a brand culture?

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Of course you do, we all have it in one way or another as business entity. It happens by default, get a group of people together, have them interact with the intention of working together cooperatively; and a culture will manifest itself right in front of you eyes.

Culture in this instant is defined as society, a way of life, a lifestyle; customs, traditions, heritage, habits, ways and values. Keep the group together long enough without defining who they are as the group, and it becomes a habit that then becomes the culture by default. Most business leaders today have a vision of who they are as a service provider, a manufacturer, a retailer and what they are delivering to their respective markets. Normally this constitutes faster service, lower prices, greater products and better “Brands” than the other guy, and then have staff to make, build or conduct the business of selling, revenue gathering etc.

So what does culture have to do with brand? Simply put, people make brands work. The culture or atmosphere of a business can influence success or failure at so many levels. Cooperation, productivity, harmony and relationships play a major part in achieving business goals. As already stated, people working together will default to a cultural pattern whether its defined or not. Brand culture is something that can be created and shared so “all” concerned understandthe customs, traditions, heritage, habits, ways, mores and values of the business and its goals.

There is a great quote that captures the essence of what it is to NOT have a planned brand culture. “I ALWAYS WANTED TO BE SOMEONE, I SHOULD HAVE BEEN MORE SPECIFIC…”

Do you have a brand culture, yes! Do you have one that adds value to your endeavors?
That’s up to you.

Leadership. Is it you or the brand?

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I have worked with many businesses, companies and individuals in my career. Some have been well established with a good market-share and doing “OK thank you”… Without exception all say they have a brand, they have organised the staff to do their job, systems are in place and distribution is set-up. They promote the brand image, they advertise the product and the sales network is taking orders.

The one defining similarity is that one person leads them. Whether a director, manager or owner they all infuse the business with their dreams, style, personality and competency. A very powerful cocktail when working with others less motivated, or possibly more in some cases. That one person, the leader, will define the brand for the company regardless if well established or brand-spanking-new. To build brand leadership the brand must be lead. Not by expectation but by example. All successful brands have defined who, what and why they are what they are.

This vision is the “Brand Culture”. Most companies allow the culture to manifest itself by default rather than design. This brand culture is exactly that, a culture brought about by internal relationships within a company- good or bad. These in turn are projected out as an attitude- good or bad. This affects the customer experience at some point, regardless whether it’s good or bad.

If you are to lead a successful brand you must define its holist character and put in place guidance as to its cultural values for ALL to follow. These in turn must be promoted to management and staff alike and educational programmes put in place on expectations and goals for all brand ambassadors.

So, do you lead by example – good or bad, or do you promote a culture that delivers exactly what you want -relationships that endure and prosper to the benefit of all so the customer gets the same experience from everyone.

I advertise. That’s marketing isn’t it?

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The advent of advertising as we know it has only been with us since the early 40’s and 50’s, with the 60’s seeing it start to come to grips with what it was doing and the methods that could be used to influence or convert consumers through the use of mass media. It has been so effective (Advertising) that it has become the standardised form of communication with the consumer. We are being sold the benefits of marketing, sorry advertising, by every ad agency, newspaper, magazine, TV-radio station and real estate agent around. The basic benefit promoted is that people will come and buy stuff after seeing your advert (Ref- Design, investment or waste of money). But is that marketing, or the servant of marketing?

Advertising is normally a one-way conversation where you never hear the answer. That is why it’s so hard to measure, the only time you hear the answer is when the till rings. But how do you know which part of the conversation was understood?

And here lies the fundamental difference between marketing and advertising… One definition of marketing is, the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments. It is an integrated process through which companies build strong customer relationships and create value for their customers and for themselves. This is clearly not just an advert in the paper, but a far more expansive objective that requires planning, timing and a commitment to working with the consumer to build a sustainable relationship to the benefit of both parties.

Marketing has only one objective, understand and secure a relationship with the consumer in a sustainable manner. Advertising is only one of the methods used to secure that relationship. So you tell me, are you marketing or just selling stuff?

Who needs a brand anyway?

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If you own or manage a business the question must have crossed your mind. I have a logo, advertise my products, I promote their features and benefits, how much they cost and where to get them. What more do I need to do?

The answer is nothing if you have no competitors, but if you compete for a share of a market then you need a point of difference on which you build rapport with the customer. A brand use to be defined as a mark or symbol that represents goods or services, today it means an experience the company has with the customer during and after the point of purchase.

All business by default have a brand, it’s called a reputation and you can’t build a reputation on what you going to do, it’s on what you are doing- right now. A brand will allow you to create the reputation required and manage its relationship, from the managers’ desk to the shop floor and on to the customer experience. A brand is not the logo, it’s the business culture and type of customer relationship required to drive business and sales.

So who needs a brand? Well, I guess the guy who cares about how he treats his customers and what they say to others.