Written by Thomas Norris
The Impact of References on Customer Lifetime Value
When it comes to sales, one of the most important factors to consider is customer lifetime value (CLV). Customer lifetime value measures the total amount of money a customer is expected to spend on a product or service over the course of their relationship with a company. It’s a key indicator of how profitable a customer is to a business, and it’s something that salespeople should always take into account when they’re considering prospects and customers.
But what many salespeople don’t realize is that customer lifetime value isn’t just about the money that a customer brings in. It’s also about the referrals that they generate. Referrals are a vital source of new customers, and they can have a huge impact on a company’s customer lifetime value. Here’s how salespeople can use referrals to maximize customer lifetime value.
Understand The Power Of Referrals
The power of referrals can’t be overstated. Research has found that referrals can lead to a 16% increase in customer lifetime value. That’s because the customer who was referred is more likely to be loyal and to spend more money over the long term. It’s also important to note that the referral process doesn’t have to end with the referred customer. They may also become a source of referrals themselves by recommending the product or service to others.
Utilize Referral Programs
The best way to take advantage of the power of referrals is to set up a referral program. A referral program is a system that rewards customers for referring new customers. It can be as simple as offering a discount to a customer who refers someone, or as complex as offering rewards points or other incentives. The important thing is to make sure that the program is clearly communicated to customers and that it’s easy for them to understand and use.
Be Proactive In Identifying Referral Opportunities
The best way to maximize customer lifetime value from referrals is to be proactive in identifying referral opportunities. That means talking to customers about their experience with the product or service and asking them if they know anyone else who might benefit from it. It also means keeping an eye out for opportunities to refer customers to other products and services that might be of interest to them.
Develop Relationships With Influencers
Another way to maximize customer lifetime value from referrals is to develop relationships with influencers. An influencer is someone who has a large following on social media or in the business community. They’re often a great source of referrals because they have a wide network of people who can be exposed to the product or service. By developing relationships with influencers, salespeople can tap into this powerful source of referrals and generate more customer lifetime value.
Encourage Customers To Share Their Experiences
Finally, it’s important to encourage customers to share their experiences with the product or service. This can be done by asking customers to leave reviews and testimonials and by providing incentives for them to do so. Reviews and testimonials are a powerful way to generate referrals, as they provide social proof that the product or service is worthwhile.
Conclusion
Customer lifetime value is an important metric for salespeople to consider when evaluating prospects and customers. But it’s also important to remember that referrals can have a huge impact on customer lifetime value. By understanding the power of referrals, utilizing referral programs, being proactive in identifying referral opportunities, developing relationships with influencers, and encouraging customers to share their experiences, salespeople can maximize customer lifetime value and gain a competitive edge.