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How to Increase the Lifetime Value of Your Customers

By January 28, 2013Article

Recent gains in collaboration technology and, more importantly, their growing adoption within companies of all sizes, now make it possible for you to impact every stage of the customer life cycle. Deploying a combination of engagement platforms and pragmatic analytics for your installed base of customers allows you to track and impact engagement, sentiment and your company’s marketing and sales performance. Increased engagement leads to longer customer life and greater lifetime value. 
Companies in all industries have long recognized the value of their existing customers. Industry studies highlight the importance of key customers. On average, companies lose up to 50 percent of their customers over five years. Reducing this attrition rate by as little as five percent extends the lifetime value of your customers and can increase profit by more than 25 percent. Acquiring new customers costs five times as much as retaining existing ones. Increase customer retention by two percent and your costs go down 10 percent. 
Balance new account growth with better engagement with existing customers 
Despite these numbers, companies often spend much more time and money on new customer acquisition. Push CRM applications and marketing automation solutions have greatly improved the process of finding and selling to new prospects. On the other end, customer service applications can do a great job of helping companies react to customer issues as they come up.
However, few companies have institutional processes in place to actively manage existing customers, and individual account managers are often left to their own devices to maintain and grow relationships with your installed base, thus, leaving a gap in the effective management of the full customer life cycle. By not taking full advantage of the engagement opportunities provided to you as the incumbent vendor, you can leave yourself open to poor insight leading to a decrease in satisfaction, increased churn and flat or falling business. 
An alternative way to consider the situation is through the eyes of your competition. They are making the same sales, marketing and IT investments as you are to identify and win new business — except new business for them is your accounts. 
The evolution of customer management 
Solutions are becoming available that help you focus proactively on your existing customers, filling the current business process and application gap between customer acquisition and customer service. You can now manage the complete customer life cycle. 
Collaboration tools that combine enterprise class robustness and performance with the design characteristics of a high level of personalization and best social features are becoming available in the marketplace. These engagement platforms can provide exclusive touch points where your customers easily interact with right members of your sales and marketing team, serve as role-based portals and smart targeted content delivery systems, deploy loyalty programs, enable peer-based collaboration and networking and continuously add to your customer profile insight. 
Analytics specifically constructed to capture information from today’s sophisticated engagement platforms, first-generation portals, social sites and any number of enterprise applications provide insight into usage trends, content adoption and customer influence indices. Sentiment analysis based on customer comments completes a richer view of how well you are connected with your customers. 
Capturing and analyzing the right information allows you to establish a series of engagement indices for either your entire installed base, sets of key accounts or even single major accounts. Well-constructed engagement indices allow sales and marketing leadership to understand trends in the installed base and take meaningful action. 
Actively impact relationships 
A good example of how this approach can impact your business is to consider renewals. 
The longer the renewal interval — and many cloud-based solutions contracts are being written for three years — the more likely you have no clue whether that customer is going to renew. There are a lot of factors that impact this — some in your control and some a function of time. Let’s focus on the factors that are in your control. 

  1. Engagement. Have you made a conscious effort to engage your customers between the sale and the renewal? Is this engagement an institutionalized process and a continuum or an anecdotal interaction by sales/account reps on an ad-hoc basis?
  • Engagement portals, customer communities or other collaborative web and mobile assets are a good start.
  1. Sentiment. Have you been tracking how the customer sentiment has trended over the interval and have you made efforts to keep that positive? In most cases, if you have not engaged, you cannot track the sentiment.
  • Make sure you can measure the sentiment, among other things, in your engagement sites, social media and other customer touch points.
  1. Time to renew. Do you have a plan of what customer actions are needed for each customer 30 days before renewal? 60 days? 90 days? 180 days? Does this plan have an owner? Is this owner being measured?
  • Be aware and conscious to renewals coming up (easier said than done). Don’t let customers get orphaned — remember competitors are always knocking on their doors. 

Cleary, technology-enabled engagement and insight make it easier for your account managers to renew business plus upsell and cross-sell new products and services. This focus on your existing customers also has the added benefit of strengthening the often contentious relationship between sales and marketing. Engagement, which is strongly influenced by marketing expertise and content, becomes measurable and hence accountable. Sales management has a better understanding of which activities impact renewal performance and new business growth before the actual sales process begins. This all translates into shared goals for your organization, more engaged customers and, ultimately, increasing revenue and profit. 
Sandeep Kaujalgi is the founder and CEO of Collabor, a cloud-based customer life cycle and collaboration solutions company. Prior to founding Collabor he was the president and CEO of i-Vantage and held senior management positions in Infosys, Syntel, Virtusa and Siemens Nixdorf. Sandeep can be reached at You can read his blog on customer engagement, “CMO’s Best Friend,” at

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