In the Relational Economy, your business rests on relationships with your clients.
And with dozens of clients to keep track of, it can be difficult to build and maintain relationships consistently as you continue to take on new ones.
That’s why it’s extra important for service-based business owners to increase the lifetime value of each client.
What is the Lifetime Value of a Client?
Wikipedia’s definition of Lifetime Value is:
“In marketing, customer lifetime value (CLV) (or often CLTV), lifetime customer value (LCV), or user lifetime value (LTV) is a prediction of the net profit attributed to the entire future relationship with a customer”
Put a bit more simply, it’s how much the customer is worth to you in terms of profit during their entire time as your client.
And since it takes so much time and mental energy to build relationships with your clients in the Relational Economy, you may now see why it’s so important to maximize the lifetime value of each client; each new client requires more effort than maintaining an existing client.
So the question remains: how do you increase the lifetime value of a client?
How to Increase the Lifetime Value of a Client
It almost seems as if the lifetime value of a client is up to the client, rather than you, right? Only they can determine how much money they spend with you and how much of a relationship they’ll build.
But there are things you can do to influence that lifetime value of each client you work so hard to build a relationship with:
- Create a Sustainable Sales Sequence
Just because you sell a service rather than a product doesn’t mean you can’t have a sales sequence.
A sales sequence is when you start by selling your client something of lower value, and then work your way up to a higher priced service.
For example, let’s say you are an esthetician. You could start by offering your client an express pedicure that costs maybe $50. Then, recommend a slightly higher priced service the next time they book an appointment. Maybe it’s a spa pedicure. After that, offer upgrades for an even higher priced service.
This works because people feel more comfortable spending smaller amounts of money with you when they first become a client, because they aren’t familiar with you yet.
The lower price packs a lower risk. As you build trust with them, they begin to see that you do good work and they want to continue doing business with you, and they’re more willing to buy your higher priced services and packages.
This has worked for many companies, and can really help increase that lifetime value.
- Create a Loyalty Program
If a client doesn’t return to you after they do business with you initially, then their lifetime value to your business is limited to the profit you made from your first and only transaction with them.
And while you knew it was good for your business to have repeat clients, this is yet another reason.
So to increase that lifetime value, entice your clients to come back by using a loyalty program.
Perhaps you offer a discount for a second visit, or provide punch cards or discount cards for subsequent visits. Maybe you give repeat clients a free upgrade.
Loyalty programs are so widely used for good reason – they can be very effective.
- Focus on that Relationship
People do business with people they know, like, and trust, and this is especially true in the Relational Economy.
To ensure that your clients stick with you and keep coming back, focus on that crucial relationship with the client.
You’re at an advantage as a service-based business owner in that you have the opportunity to really get to know the client on a deeper level, which can help you get to know what they need from you.
Meeting their needs with your services and building a solid relationship with them will increase the lifetime value of your clients authentically.
You’ve earned your clients through hard work, so it makes sense that you’d want to keep them around and turn each of those hard-earned clients into repeat customers.
Doing these three things to increase the lifetime value of your clients will go a long way to make your business more profitable and fulfilling.