Customer lifetime value (CLV) is the net profit a repeat customer will generate for your company over their lifetime. To predict a customer’s CLV, companies calculate the cumulative value and frequency of all a customer’s transactions. By shifting the focus from short-term value to lifetime value, companies can predict, and improve, their long-term financial health.
According to the Harvard Business Review, it costs 7 times more to acquire a new customer than it does to retain an existing one. Companies that increase their customer retention rate by 5% see a 25% to 95% increase in profit. In the long run, then, a business strategy that retains a small number of repeat customers is more valuable than one that attracts a large number of one-time customers.
The key to retaining customers and increasing their customer lifetime value is to deliver an excellent customer experience. You can use a customer satisfaction survey to get the data you need to understand and improve your company’s customer experience.
Customers are increasingly placing monetary value on the ease and consistency of customer experience. As many as 55% of customers say they are willing to pay more for an excellent experience, even if the product or service is the same in the end. When people know they’ll have an excellent experience with your company, they don’t spend time looking for cheaper alternatives.
A bad customer experience has the opposite effect on profit. Every time a customer has a bad experience, your company loses more than $500 in customer lifetime value, according to Ernst & Young. And most companies have no idea it’s happening! Just 4% of dissatisfied customers will tell your company about their bad experience.
To build a better customer experience, turn to data from customer satisfaction surveys. These surveys help you understand and improve your customer experience. In fact, just sending a survey to customers can, itself, boost satisfaction.
The Net Promoter® Score (NPS) Survey Template is always a good place to start your customer satisfaction survey. NPS uses how like a survey respondent is to recommend a company, product, or service to measure customer satisfaction.
NPS is a popular way to measure customer satisfaction, across industries, for a number of reasons:
Follow up the NPS Survey with more specific questions. Use an open-ended question to ask customers to explain their score or select one from our Question Bank.
A satisfied customer is far more likely to make another purchase from your company than a dissatisfied customer is. To retain customers and improve CLV, then, be sure to collect and listen to feedback from satisfied, as well as dissatisfied, customers. Unfortunately, according to a Zendesk study, satisfied customers are about 50% less likely to give your company feedback.
To reach the silent majority of satisfied customers, take measures to improve your overall survey response rate. A high response rate produces more statistically significant results and data that isn’t skewed by a few angry customers. Here are a few ways to boost your survey response rate:
A great customer survey with a high response rate helps you reach those repeat customers who provide the most value to your company. Feedback from these customers gives you important insight into the ways you can improve the customer experience and, by extension, the CLV of your customers. A business strategy that puts these satisfied customers first helps ensure the long-term financial health of your company.
NPS, Net Promoter & Net Promoter Score are registered trademarks of Satmetrix Systems, Inc., Bain & Company and Fred Reichheld.