#CustomerExperience #DigitalServices

This is the ultimate guide on how to measure and improve CLV, CRR and CCR. Here, you’ll find everything you need to know about the most important customer success metrics and what to do to achieve CX greatness.

Contents:

What is Customer Lifetime Value (CLV)
5 reasons why Customer Lifetime Value (CLV) is im#portant
How to measure Customer Lifetime Value (CLV) ‒ 5-step formula
How to improve Customer Lifetime Value (CLV) in 8 ways

What is Customer Retention Rate (CRR)
12 reasons why Customer Retention Rate (CRR) is important
How to measure Customer Retention Rate (CRR) ‒ 3 formulas
How to improve Customer Retention Rate (CRR)

What is Customer Churn Rate (CCR)
6 reasons why Customer Churn Rate (CCR) is important
How to measure Customer Churn Rate (CCR) ‒ 2 formulas
How to improve Customer Churn Rate (CCR) in 6 steps

Which metrics to use?
Conclusion

What is Customer Lifetime Value (CLV)

This article will teach you how to measure and improve CLV, CRR and CCR, but first – what is Customer Lifetime Value (CLV)? CLV is a metric that represents the total net profit a company is expected to have from a customer over the course of their entire relationship. In simpler terms, CLV is the average amount of money a customer is likely to spend on a company’s products or services during their lifetime.

So basically, the longer customers buy from a company, the bigger their lifetime value. The customers with a high CLV are the ones who make frequent, high-value purchases.

5 reasons why Customer Lifetime Value (CLV) is important

CLV is a key measure for determining a customer’s long-term worth. Calculating Customer Lifetime Value will indicate how much revenue they are likely to generate over their lifetime. You can then use this data to determine how much you should invest in customer acquisition and retention.

Still not convinced? Here are the top 5 reasons why to measure CLV:

1. Knowing your customers’ CLV helps you discover which customer segments are the most valuable and spend your marketing and sales resources accordingly.
2. If you know the CLV of different customer segments, you can make more informed decisions about budget allocation. For example, if you know that acquiring a new customer is more expensive than retaining an existing one, you may naturally choose to invest more in customer retention programs.
3. Once you measure customers’ CLV acquired through different channels, you can make calculated decisions about which customer acquisition channels to focus on.
4. CLV offers insight into a customer’s long-term value, which can drive strategic decisions about product development, expansion, and revenue projection.
5. Knowing customer CLV means knowing who your most profitable customers are. With that information in your pocket, you can focus on retaining them and providing an exceptional customer experience.

How to measure Customer Lifetime Value (CLV) ‒ 5 step formula

So, at this point, you are wondering how to measure and improve CLV, CRR and CCR. According to research, just 42% of businesses can effectively measure their CLV. Follow this 5-step formula to successfully calculate CLV:

1. First calculate the Average Purchase Frequency Rate (APFR) ‒ the number of times a customer makes a purchase over a specific period of time.
2. Then calculate the Average Purchase Value (APV) ‒ the average amount of money spent by a customer during a single purchase.

3. Having the APFR and APV, you can now calculate the Customer Value (CV) ‒ the overall value that a customer brings to your business over a specific period of time.

4. Then calculate the Average Customer Lifespan (ACL) ‒ the average number of years a customer continues purchasing from your company.

5. And finally, you can now calculate the Customer Lifetime Value (CLV).

How to improve Customer Lifetime Value (CLV) in 8 ways

1.     Personalization, personalization, personalization

• Offer personalized incentives, such as discounts or rewards based on customer behavior or purchase history.
• Use customer data to make personalized product recommendations. 75% of consumers are more likely to buy following personalized recommendations.
• Personalize your marketing. More than 70% of consumers respond to marketing only when it’s customized to their interest, with around 75% of them being outright frustrated by generic adverts.
• Send emails with personalized subject lines. They are 50% more likely to be opened.
• Create customized landing pages for different customer segments or for specific campaigns.
• Personalize the communication by using the customer’s name, location, and other personal information.
• Use A/B testing to test different personalized messages and offers to see which ones perform best with different customer segments.

2.     Active listening

63% of consumers expect businesses to recognize their individual needs and expectations.

Evaluate your customer’s needs through surveys such as the NPS (Net Promoter Score), CSAT (Customer Satisfaction), and CES (Customer Effort Score). These will help you understand how customers perceive your brand and identify areas for development:

You may find information and formulas for measuring NPS, CSAT, and CES in the Measuring Customer Experience article.

Make the most of your data by offering optional short comments on the rating. Allow consumers to explain their ratings and make suggestions on how to improve your customer service. Customers will appreciate the effort and remain loyal to your business if you ask for feedback and act on it.

3.   Monitor and analyze customer data

Use data and analytics to understand customer behavior, preferences, and spending patterns. This can help you identify opportunities for improvement and make more informed decisions about how to increase CLV.

4.  Omnichannel personalization

From personalized marketing to personalized support, the omnichannel approach can greatly improve CLV. Delivering a consistent and seamless experience across all channels makes it easy for customers to receive the support they need, reducing customer effort and boosting their satisfaction.

Omnichannel integration will give your business a complete view of customer interactions and purchase history, helping you identify opportunities for personalized marketing, cross-selling and upselling.

Related: Next-Generation CX & Omnichannel Support

5.  Reward loyalty

Your most loyal customers are your greatest brand advocates. Use customer data to create personalized offers or discounts that are tailored to their interests and purchasing habits.

Reward loyalty through discounts, freebies, or exclusive offers for frequent purchases. Give your loyal customers special access to events, sales, or early access to new products. Recognize their loyalty publicly on social media.

The key is understanding your customers’ value and creating a loyalty program that aligns with their needs and preferences.

6.  Increase the frequency of communication

Regularly communicate with your customers about new products, services, and promotions. This will help to keep your business top of mind and increase the likelihood that customers will return.

7.  Increase customer spending

Encourage customers to purchase more often and to purchase higher-priced items through upselling and cross-selling by offering incentives for larger purchases. Create product bundles and packages that make it easy for customers to purchase multiple products or services at once. For example, a customer buying a new laptop may also be encouraged to purchase a laptop bag, a warranty, and a mouse.

Always keep in mind the golden rule of upselling: customers should feel that the recommendations are tailored to them and not just a sales pitch.

8.   Increase customer referral

Encourage happy clients to refer you to their friends and family. Referral schemes and incentives can help with this. Offering a referral program increases your CLV while also exposing you to new potential consumers, who can later be turned into loyal clients. Customers who have been referred have a 16% greater lifetime value and 18% lower turnover. In addition, 81% of consumers trust suggestions from people they know, and 55% discuss their new purchases on social media.

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What is Customer Retention Rate (CRR)

The Customer Retention Rate (CRR) is a metric that calculates the percentage of customers who continue to do business with a company over time.

Customer retention refers to the process of keeping customers. It can be used to uncover trends and patterns in consumer behavior and is used to track how successfully a company retains its customers.

12 reasons why Customer Retention Rate (CRR) is important

Calculating CRR will help you understand how many customers continue doing business with you. Read on to find out why client retention is crucial for the success of your business:

1. Acquiring new customers involves marketing and advertising costs, which is why it is 5 to 25 times more expensive than keeping existing ones.
2. The likelihood of selling to an existing customer is 60-70%, as opposed to 5-20% to a new customer.
3. Existing customers spend 31% more.
4. Existing customers are 50% more inclined to try new products.
5. Even a 5% improvement in client retention improves profitability by 25-95%.
6. Existing customers contribute to word-of-mouth marketing.
7. Existing customers are five times more likely to purchase and four times more likely to refer than new visitors.
8. Long-standing relationships make for easier data-gathering about customer behavior. This helps development, marketing, and sales efforts.
9. CRR helps identify issues, suggestions, and opportunities to increase customer loyalty and retention.
10. CRR provides insights into how many users value your product over time.
11. Enables targeting ideal customers.
12. New customers come and go, but an established customer base can provide a more stable source of revenue.

Despite this, 44% of businesses prioritize client acquisition versus 18% that favor retention.

How to measure Customer Retention Rate (CRR) ‒ 3 formulas

CRR formula #1

Add the total number of customers at the end of the month, subtract the number of new customers added during the month, and divide by the total number of customers at the start.

It looks like this:

CRR formula #2

Subtract the number of customers who churn over time from those who remain loyal:
90% retention  – 10% churn = 80% retention rate

CRR formula #3

Consider how many customers remain loyal for one period of time versus another.
% of loyal customers in period one / % of loyal customers in period two = retention rate

How to improve Customer Retention Rate (CRR)

Customer Retention Rate and Customer Lifetime Value are strongly linked. In other words, they are both a result of a successful and profitable relationship with your customers.

The higher the CLV, the higher the CRR is likely to be. If you take the initiative to raise your Customers’ Lifetime Value, retention will most likely follow suit. This is not pure cause-and-effect, but the two values are both driven by the exact origin: customer satisfaction.

As a result, to increase the CRR, follow the above 8 steps for improving Customer Lifetime Value.

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What is Customer Churn Rate (CCR)

Customer Churn Rate, or Customer Attrition Rate, is the percentage of customers that stop doing business with your company.

In a subscription model, it is the percentage of subscribers who cancel their subscriptions within a given time period.

6 reasons why Customer Churn Rate (CCR) is important

A high percentage of customer churn is a red flag for businesses as it suggests that they are losing clients at an alarming rate, and there must be a reason behind it.

Regularly measuring your CCR rate will allow you to react to negative trends and prevent other customers from leaving.

1. 32% of customers would stop doing business with a brand or company they’d previously loved after just one negative experience.
2. Getting new customers ‒ or winning over churned ones ‒ is far more expensive than keeping existing ones. In particular, between 4 and 10 times more.
3. The lower the churn rate, the larger the number of loyal customers.
4. CCR measures the impact of various products/services/projects or company initiatives.
5. CCR determines the company’s progress and provides benchmarks to measure against.
6. Some industries are more affected by churn than others: in the United States, online retail has a churn rate of about 22%. However, SaaS companies aim for a yearly 5% or less churn rate.

How to measure Customer Churn Rate (CCR) ‒ 2 formulas

CCR formula #1

1. First define a specific period to calculate your churn rate.
2. Then divide the number of customers who churned by the total number of customers you had at the start of the time period.
3. The formula is: CCR = total number of customers lost divided by total customers started with.

CCR formula #2

Another possible way to calculate the churn rate is to do a reverse sum of the retention rate.
Churn Rate = % lost customers in period X / % lost customers in period Y

How to improve Customer Churn Rate (CCR) in 6 steps

Aside from following the eight steps to boost CLV and CRR ‒ which will also positively influence the CCR rate ‒ there are other measures to take to avoid a high customer churn rate (CCR):

1. Identify customers at risk of churning

Use data analytics to identify customers at risk of churning and reach out to them ahead of time to address any difficulties or concerns they may have.

2. Investigate why customers are leaving

Determine why customers are leaving through surveys, calls, focus groups, or other feedback channels. Then take steps to solve the core problems.

3. Provide incentives

Offer incentives for staying, such as loyalty programs, exclusive deals, or other perks.

4. Work on improvement

Continuously work on improving the quality and features of your product or service. The needs of your customers are constantly evolving, and so should you.

5. Be proactive

Monitor customer engagement and be ready to address any concerns that may arise. Be proactive in finding and solving potential issues.

6. Invest in retention marketing

Use targeted marketing efforts to retain existing customers, and make sure they are aware of the value they are receiving from your company.

[Read more] How to measure Customer Experience

Which metrics to use?

There are many metrics for measuring the customer experience, but should you track all of them? Well, the answer is no. BUT, you should carefully review your business goals, set the indicators relevant to your business, and measure those. Before you send out surveys and ask for customer feedback, you should know precisely how to measure and improve CLV CRR and CCR.

However, we think it’s important to understand the appropriate customer experience metrics for your company’s growth. Moreover, it’s important to know how to measure and improve CLV, CRR and CCR. But, if you have difficulty identifying, tracking, and measuring all those metrics, you can always reach out to us. FrontLogix provides strategies for improving your overall customer experience and improving the CLV, CRR, CCR, and other important KPIs.

Conclusion

Providing a positive customer experience is critical to keeping your customers happy and satisfied. They’ll stay longer, and you’ll have better business results. As a result, investing time and money in measuring customer experience metrics is essential. These metrics will not only help you understand how simple your customers find it to use your product or service, but they will also provide you with actionable insights into improving many aspects of your business. This can significantly impact your company by lowering churn or increasing retention.

Simultaneously, these metrics can help you see where your CX team excels and where they can improve. Collecting and analyzing these metrics can also improve your products, services, and procedures. The better you understand how your customers use your offer, the more enjoyable you can make the entire CX for them. Finally, we hope this article helped you learn how to measure and improve CLV, CRR and CCR and you’ll finally reach the success you long for!

If you’ve read previous entries of this blog, you already know the importance of exceptional Customer Experience and its impact on business growth. But reaching Next-Gen Customer Experience is not an easy job! This guide reveals what to do to improve your customer experience.

It’s all about the people

No matter what the tech companies say about chatbots and AI, you still have to have the right people! No software will help customers as much as talking to a real human will. So, to improve Customer Experience, you need to have a dedicated team of Customer Experience Representatives (CXRs) who will always be there to take proper care of your customers.

This team of skillful, knowledgeable, resourceful, creative, educated, well-trained, and helpful people will be accessible whenever your potential or existing customers need them. They’ll listen to your customers, understand their questions, and keep them happy. Your team needs to prioritize learning everything about your business, its products, competition, strengths, and weaknesses, and knowing how to provide solutions best to help your business grow.

[Business Process Outsourcing: examples ]

Get there on time

Customers hate being on hold, no matter how nice the music is. 
A report by TalkTo shows that customers spend, on average, 43 days of their lifetime being on hold, which is equivalent to 13 hours per year. That is 43 days (and nights!) that one can spend doing something – less frustrating.

Reduce call wait times and improve the scheduling and coverage of your contact center. Have flexible support personnel available during peak times. Add extra call queue settings like Queue Call Back, which provides callers with a call-back service as soon as possible. The queue to Voicemail, which allows callers to leave a message rather than wait in line, and Queue Size Limit, which sends callers directly to voicemail when the maximum queue limit has been reached.

Your customers just want their questions answered or their issues resolved. Not in minutes, seconds. And at any time, day or night. So, no matter the time zone, business hours, or communications channels – You. Have. To. Be. There.

The Omnichannel experience

The omnichannel experience combines interactions from several channels into a single, seamless experience. As a result, if a customer abandons an item in their shopping cart on one platform, they will see an advertisement for the identical item on another. This ensures a personalized customer experience, which leads to improved conversion rates, more sales, and increased customer loyalty.

Furthermore, omnichannel support links to every customer service channel. As a result, data is centralized, and customer effort and time are reduced across all interactions. Customers can carry on a conversation with customer care from chat to email, an app to phone call, without having to describe their problem from the beginning.

That’s exactly what customers expect from brands—seamless communication and exceptional care. 

Delivering the omnichannel experience is challenging but will improve your customer experience and business growth. Make sure you put effort into everything you do.

Seven tips on how to improve the Omnichannel experience

1.     Mobile-Friendly

Aside from being informative, stable, and speedy, it is critical that your website be mobile-friendly, given that over 63% of Google queries are mobile-related.
There are two ways to optimize the website for mobile devices. The first is through a responsive web design, and the second is a “mobile-first” approach.

A responsive web design automatically resizes the elements in the website to make it look good on all devices. Mobile-first refers to initially developing a website for the more restricted mobile phone version and then expanding its functionality to build a tablet or desktop version.

While responsive website resizes – but keeps – all the content to make it physically possible to read, mobile-first websites have proactive changes in the overall design. Mobile-first design reduces bulky content and considers factors such as white space, font size, and load time, resulting in a better overall user experience.

When designing the mobile version of the website, avoid including too many animations and other elements, as these will make loading the page’s content more challenging. Remember that visitors will leave your website if pages don’t load quickly enough.

Thanks to a mobile-friendly website, anyone who attempts to access your website on a mobile device will have a positive experience, encouraging people to view you as a reliable source of information, goods, and services.

2.     Live chat support

Many of us fret about making phone calls and choose to message instead. At the same time, we seek immediate solutions. With live chat, you give your customers a method for immediate contact and fast problem resolution.

In an ongoing chat, agents can evaluate the customer’s tone and create rapport by mimicking style or changing formality to match the customer’s. Aside from providing a more genuine method to demonstrate your agents’ personality, chat tools facilitate query resolution by allowing the agent to share a screen with the customer or provide links and screenshots.

Even if your customers don’t need to talk immediately, being ready to assist them creates trust.

Have a chat prepared with quick and instant replies, or for connecting with a CXR. Live chats are an excellent tool for immediate response and an appropriate bridge for linking with a CXR.

3.     Social support

According to Statista, the average daily social media usage of internet users globally was 147 minutes per day in 2022, with 86% of users following a brand on social media and 25.1% doing so to communicate with them, according to a report from Sprout Social.

Whether the experience was pleasant or negative, many customers use social media to share their thoughts and communicate with brands. Social media is a wealth of opportunity for developing a meaningful relationship with your target audience. 

Customers need to find you via social media. If you have the proper communication and support on social, it will massively add to your CX equation.

4.     Self-service solutions

While some customers may contact you for an immediate answer, some customers would rather self-serve to find a solution by reading a FAQ or watching a video. In fact, more than 60% of consumers prefer digital self-service over alternative service choices. The reality is that customer self-service, in actuality, serves a distinct need; it delivers faster fulfillment. 

Apart from contributing to improved customer experience, self-service reduces costs by allowing you to assist a huge number of consumers simultaneously. It also improves customer service by decreasing duplicate requests in your queue, making support work pleasurable, and contributing to more engaged and happier agents.

Bear in mind that not all self-service is effective at assisting consumers. Complicated technology and poorly configured chatbots that make it challenging to find a quick answer keep customers in endless loops can only add to customer frustration.

Good self-service provides flexible automation features, FAQ knowledge base, video tutorials and product training, and chatbot escalation options. 

When effectively implemented, good self-service solutions increase business productivity while decreasing customer-service expenses.

5.  Email support:

Customers prefer to communicate via email since it leaves a solid paper trail, is easier to track and preserve, and is essential for some more official exchanges.

Have an email dedicated to your customer’s queries, and check it frequently. Reply to their emails immediately, and provide solutions right into their mailboxes.

Email support is excellent for lengthy discussions and sending large files. It also comes in handy for boosting sales. The advantage of using mail is that it allows you to incorporate promotional materials and recommendations while replying to consumer inquiries. Email is an efficient, quick, low-cost communication and marketing tool that adds to the funnel.

6.     Phone & SMS support

Phone support – the essence of customer service – is still the preferred method for customer issue resolution. In an age of automation and device-mediated interactions, phone assistance gives your business a human and personalized touch.

As the human voice has a significantly stronger influence on the brain than written text, phone support allows you to make a pleasant and lasting impression on customers. The phone is still the number one contact method when customer experience complicated issues.

Always have a dedicated support number available for your customers. A line that they’ll be able to reach at any time. And if they prefer to text instead of call, give them that too. They will appreciate the effort.

7.     In-app support

Finally, have a prepared solution for all your customers who don’t text or call and don’t prefer email or live chat. Find out the channel or the app they use and be there. Customers who are used to communicating via messaging apps will find in-app assistance a familiar experience. Provide support via Messenger, WhatsApp, and any other platform your customers use and find valuable. Adjust to their communication habits and show up in the right places. You will not believe the satisfaction you’ll get with such a simple step.

[Read about] Main elements of a good customer experience

The Bottom line

Customers will have all sorts of questions. While you can’t predict everyone, you can foresee how customers will try and get in touch to ask them. Make sure you make it easy to contact you in the ways they prefer. They need to feel appreciated and heard because served customers are satisfied customers!

We at FrontLogix firmly believe in this cycle. Every situation has a solution, and we are here to provide one. Get a quote today.

Here we list nine ways CX impacts business and drives growth.

Great CX improves customer satisfaction and loyalty, leading to higher sales, increased revenue, and improved brand reputation. A growing body of evidence shows that companies can increase their revenue 5-10% by improving their customer experience strategy. Still not convinced how a great CX can impact your bottom line?

Here are nine more reasons:

9 ways Customer Experience impact business

1. CX improves relationships with your customers

Good Customer Experience and customer satisfaction go hand in hand. The better the Customer Experience, the higher the customer satisfaction. Therefore, companies focused on providing seamless, outstanding, and consistent Customer Experience across all customer journey touchpoints are more likely to increase overall customer satisfaction. And what does it mean to have satisfied customers? It means they will buy more!

2. CX enhances customer retention

Getting new customers is hard. But keeping customers and persuading them to come back is even more challenging. This challenge is called customer retention.

Retaining a customer means that your company’s brand, product, or service is more valuable than your competitors’. This is precisely why customer retention is a critical key performance indicator (KPI) to be tracked, observed, and improved over time. An excellent Customer Experience shows your buyers how valuable they are, which helps retain them and drives business growth. If you want to learn more about how CX enhances customer retention, download our guide.

3. CX improves Customer Lifetime Value

Customer Lifetime Value (CLV) is one of the most important metrics for a company. Essentially, CLV measures the total income a company may expect from a typical customer as long as they remain on board.

And how do you keep them on board? By keeping them happy, valued, and heard by providing an outstanding Customer Experience. Improved CLV also means improving customer retention and avoiding customer attrition (churn). It drives repeat buys and encourages high-value sales, increasing profitability and growth.

4. CX reduces customer churn

Customer churn is inevitable. At some point, your buyers will stop using certain products or services. And there can be many reasons for this, like fierce competition, price, product quality, and most pertinent to this post, poor support and customer service.

More than 80% of customers are likely to churn if not given a good CX. While you may be unable to control what your competitors are doing, you have complete control over how your customers are treated. Lowering churn is the same as increasing revenue.

5. CX improves CSAT scores

CSAT is one of the most important KPIs for you to watch. Short for Customer Satisfaction Score, CSAT determines if a customer believes a company’s products or services have met their expectations.

And how do you improve that percentage? By making more of your customers happy and satisfied. You can do this by improving the Customer Experience through care and support of customer needs.

6. CX boosts sales

Great CX and improved sales are linked. Delighting your customers during their journey results in higher sales and more revenue. 

The cycle is quite simple. Customers that feel heard, understood, and valued will be happy. Happy customers will always ask for more and, even better, will spread the word to new customers.

7. CX increases brand loyalty

We would argue that brand loyalty is among the most important (and hardest to achieve) aspects of your business. Why? It reflects the image your customers have of your business. It’s the reason they have chosen you in the first place and why they’ve stayed with you.

Loyal customers are the ones who keep purchasing. Loyal customers are repeat customers, even when the competition offers something cheaper or better.

Loyalty is gained through amazing CX. Personal communication, dedicated onboarding, assistance during purchase, post-purchase care, and attention make your customers feel like they belong. 

[Тhe definitive guide to outsourcing services]

8. CX creates strong brand advocacy

Once you have all those happy, loyal, returning customers – you have your brand advocates! Satisfied customers stand behind their brand of choice, refer it to others, and recommend it constantly. And not surprisingly, most of the customers recommend a brand based on their Customer Experience.

Word of mouth is one of the most trustworthy kinds of advertising. To be precise, 92% trust the word-of-mouth recommendations. So, by having an exceptional CX, you’ll quickly gain the promoters that will bring you the growth you want and need.

9. CX creates a competitive advantage

You can have an advantage in many business areas and stand out from your competitors. Providing a superior CX is one of the most critical competitive advantages. Customers care that you care. To show you value your customers more than the competitors do is something every company is now fighting for.

The big conclusion

Business growth comes from various areas. But Customer Experience is always at the core of it.

Outstanding Customer Experience will help you attract customers, introduce them to your brand, hook them, and keep them in your ecosystem.

Satisfied customers will become your advocates, make you stand taller than the competition, and help your business grow. So it’s not a question of whether Customer Experience supports business growth. 

The biggest question is: When will you start improving your Customer Experience and, more importantly, how?

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How FrontLogix can help:

Front Logix offers personalized solutions to build stronger customer relationships, increase sales, and improve retention rates. Here you can read more about the services we offer. Contact us today.