Last week we were conducting a session with one of our group consulting client cohorts and discussing the amount of effort sometimes required to convince others in the SLT that focusing on improving the customer experience will drive improved business outcomes.
One thing that everyone unanimously agreed with is that even the most hardened senior executives respond to a plan that will result in an increased probability of exceeding revenue and sales targets.
One method they have all used with some success is to start by asking their colleagues if they would like to get and/or stay on the green line sooner? - automatically, their colleagues respond with “Yes, of course, how will you do that?
Our clients have found responding by saying they could use a structured customer thinking framework specifically designed to improve business outcomes places the focus where it should be - on business outcomes.
Rather than an exercise in solely making customers feel good, focusing on the business outcomes this will improve the business is the best way to keep things on track.
Our clients are finding that they can then feel more confident walking their CFO or CCO through our 9 Step Structured Customer Understanding model and demonstrating how it will add significant value and ensure the organisations remains on the green line of growth and improvement.
All that’s needed then is to connect the investment to the financial and business outcome.
Because we have found that most senior leaders are just looking for the clarity and confidence that any expenditure they approve will deliver the agreed outcomes.
It also becomes clear that using a structured understanding model isn’t that risky at all.
It covers off like we discussed in our recent article every angle that ensures if success is not assured, it comes very close and it makes absolute sense as a framework to put them on the green line.
One way to provide financial clarity around ROI, is to calculate your Customer Lifetime Value (CLV). Here’s the simple definition:
Customer Lifetime Value is how much money a customer will bring your brand throughout their entire time as a paying customer.
Businesses can use this metric to identify significant customer segments that are the most valuable to the company.
Calculating CLV is important because once you have an idea of what your customer is really worth over time, you will have a better idea of how much you can afford to spend to win and more importantly, keep that customer.
It helps you make important business decisions about sales, marketing, product development and customer support. For example:
- Marketing: How much should we spend to acquire a customer?
- Product: How do we prioritise what products and service features we build for customers?
- Customer Support: How much should we spend to service and retain a customer?
- Sales: What types of customers should sales reps spend the most time on trying to acquire?
The simplest formula for measuring customer lifetime value is in the formula below:
CLV = Actual Total Spend to Date + (NPV of expected Future Spend x years loyalty)
It’s been called the most important metric for your business and with good reason. It’s also one of the more under appreciated, perhaps because many brands struggle to properly define and calculate it.
When you truly understand the value of your longer term customers, it becomes far easier to convince senior leadership of any investment.
Use the Future Scenario Model and Lifetime Value to challenge your colleagues to think through their own level of natural urgency and if they don't employ this solution, what is the alternative to guaranteeing a future on the green line?
When looking at the three options, the visual logic says that now is the best time to take action.
Investing today to better understand your customers ensuring they remain longer and advocate for you, attracting new customers is no longer a hurdle for the SLT to get over.
It's just a natural part of the due diligence process required to support other business decisions.
CX leaders no longer have to ask their CFO to trust them.
They can provide the confidence that they will employ the same rigour as the Finance department does in preparing year end accounts.
Lifetime Value gives you the much sought after metric CX leaders have been looking for.
If you would like to understand how we have helped other organisations understand their Customer Lifetime Value and build the Business Case for CX investment, click here to find out more about our Customer Thinking approach.
Would you like to understand how you can use Customer Lifetime Value to gain faster approvals and larger investment for your customer programs?
Just reply to this email with CLV in the subject and we will share with you the approach we have used for our other clients - obligation free. Our purpose is to help as many businesses get to and remain on or above the Green Line.