We covered the basics of what to measure while trying to acquire a new customer, but what happens after you close the sale? It is often easier (and less resource intensive) to retain a customer than it is to acquire a new one, so continuing to track your marketing effectiveness is equally as important during the retention and upsell process.
Measure everything so you get everything
All traditional marketing metrics should be tracked – impressions, engagement and response rates, and take rates on offers or promotions. One additional step in the process is understanding the lifetime value of the customer. Not only is the original sale important, any additional purchases, renewals, or upgrades add value. Your highest value (or most profitable) customers are not necessarily those who buy your higher end products. Consequently, understanding the satisfaction of existing customers and their propensity to renew or upgrade is important to increasing their lifetime value.
Estimate your customer lifetime value (CLV)
So how exactly do you estimate what a customer is worth? The simplest way to think of it is this basic equation:
Average order value ($) x Average # of orders/year x Average # years/customer = CLV
Ex: You add up your total sales for the year and it is $100,000 across 10,000 orders (not customers). In that same year, you had 1,000 customers buy from you. You check past order history for the 1,000 customers and the average (mean) number of years they’ve done business with you is 10 years.
$10/order x 10 orders/year x 10 years/customer = $1,000/customer
Once you’ve determined an average CLV, you can divide your customers into cohorts or segments. For a simple example, let’s say you decide to segment your customers into two groups – below average and above average. So any customer that has a CLV > $1,000, you consider them a high value customer.
Understand and upsell your existing customer base
Now that you have your segments, you can begin to get smarter about your retention and upgrade marketing. For example, one of the primary ways to utilize your high value segment is to create a profile of what these customers “look like” – from demographics to past purchasing behavior. This profile will help identify likely “below average” customers to target with upgrade opportunities. Similarly, it will also help you better target your prospect marketing because you will have a better understanding of what type of customers will buy the most from you.
In any segment, you should never only push upsell offers and not reward loyalty. While upsell is the best case scenario, simple retention should not be overlooked. Customers could be at their max of either need (of your product / service) or may simply be out of budget. Learn more about how to retain customers in this blog post.
Track customer satisfaction and use the data to make changes
Sales data is probably the most straightforward way to measure your customers’ satisfaction; if your customers aren’t satisfied they likely would not continue to buy from you. However, it doesn’t tell you why you may lose a customer or a customer doesn’t choose to buy more. Consequently, you should establish ways to measure customer experience and satisfaction whether it is post-sale email that gets triggered after an order is delivered or a survey sent to all your customers who have not bought from you in a set amount of time.
One generally accepted way to measure customer experience is through a Net Promoter Score. It is a single question with the goal of finding out how likely someone is to recommend you to their friends and family. What is helpful about this metric is that you can see how you compare against your peers as industry benchmarks have been established.
Other questions to ask can be specific to your company. For instance, simply asking how satisfied your customer is doesn’t provide enough context for the responses to be actionable. However, following up with specifics such as how satisfied are you with the order process, shipping, return policy. etc. may give you additional insights into what drives overall satisfaction.
Remember, tracking is only the first half of the process. The second half is taking the data and making adjustments based on the insights. And don’t forget to remeasure to see the impact of your improvements and changes.