Customer Value Optimization: How to Build an Unstoppable Business
In 2021, the cost of obtaining new customers is an average of 6-7 times higher than retaining existing customers. This figure should tell you one key thing: if you don’t have a customer value optimization system, you’re losing sales and profit.
Developing a marketing optimization strategy may sound like digital marketing magic, but it’s very simple.
This article will cover the basics of customer value optimization, walking you through a simple seven-step process that will build your strategy from the ground up.
WHAT IS CUSTOMER VALUE OPTIMIZATION?
Before we dive into the art of optimization, let’s first define some key terms.
Customer Value Optimization, sometimes shortened to ‘CVO,’ is the process of designing a strategy for your business that increases your profits by maximizing the value of your existing customers.
Marketers often compare optimization to conversion rate optimization (CRO) – but there are critical differences between the two. While optimization works to increase the profitability of all customers, conversion rate optimization focuses solely on your calls to action.
Optimization strategies are based on the work of legendary marketer Jay Abraham and his business growth principles:
- Increase your customer numbers.
- Increase the number of transactions per customer.
- Increase the average transaction value per customer.
With Abraham’s principles in mind, the benefits of implementing a good optimization strategy are clear. A successful strategy will grow your customer base and increase your profits through increasing transaction size and quantity.
Ready to design an optimization strategy for your business? Make sure you get a good night’s sleep to maximize your energy and keep reading to learn how to boost your business’s customer success.
STEPS FOR EFFECTIVE CUSTOMER VALUE OPTIMIZATION
Now that you understand what a customer value optimization strategy is, you’re almost ready to learn how to implement one in your business.
However, you’ll need one more thing before we get there: a map of your sales funnel. As optimization strategies rely on tweaking your sales funnel, having your sales funnel at your fingertips will help you visualize how the tips in this article will help your business.
Got your sales funnel ready? Good. Let’s continue.
#1. Optimize your product’s value
The first step in any optimization strategy is increasing the ‘value’ of your goods in the eyes of your target customers. Like currency, your goods are only as valuable customers agree that they are.
As perception is critical in this stage, there are three steps you need to take to optimize the perceived value of your goods.
First, you’ll need to understand what your customer’s needs are through qualitative research. In a best-practice scenario, you’ll want to collect insights from customers in 2-3 focus groups of five people each – as this will give you a diverse pool of opinions.
Next, you need to alter your digital marketing to explain how your goods meet your customer’s needs. There are many ways to do this, including altering the keywords you target and tweaking your:
- Social media marketing
- Product guides
- Website blog content
- Paid-per-click advertising
- Influencer marketing
Finally, you’ll need to tweak your website to emphasize the most critical aspects of your goods. Follow these steps to create a website if you don’t already have one.
#2. Choose a traffic source
Next, you’ll need to choose a traffic source to target. Step two is pretty simple, as you simply need to choose which of these traffic sources you will use:
- Organic search results
- Paid search results
- Paid-per-click advertising
- Social media
- Referral links
- Email links
Once you’ve chosen a traffic source, you’ll need to optimize your sources with link trackers. If you’ve never used link tracking before, follow the steps in this best link trackers guide to get started.
#3. Offer a lead magnet
Once you’ve tweaked your goods and optimized your traffic sources, it’s time to draw leads in by offering a lead magnet. A lead magnet is a free product or service you provide to leads in exchange for their contact information.
Lead magnet-based strategies have a higher conversion rate than other forms of marketing. Once you have customer’s information, you can market your goods directly through their email, mailbox, or social media feeds.
Lead magnets are also a great way to engage with customers, which is essential for your bottom line. The best lead magnet for your business will depend on three factors: what you sell, who your customers are, and what they want. For example, Recruitee offers a free eBook in exchange for signing up to their mailing list.
However, you don’t just have to stick to an eBook. If you’re stuck for inspiration on how to offer a lead magnet, try these ideas:
- Cheat sheets or checklists
- Planner or calendar
- Web or mobile app
- How-to guides
- Event tickets
- Industry reports
- Free courses
The above lead magnet ideas are one among many call-to-actions you can use to spur conversions from customers. Examine your strategy, understand your audience better and choose the one that fits.
#4. Offer a tripwire
Next, it’s time to turn leads into customers with a tripwire. A tripwire is a small purchase of $1-20 designed to ease customers into a larger purchase. Tripwires have three great benefits:
- They are an easy sell to anyone that likes your lead magnet.
- They allow customers to interact with your products.
- They keep customers engaged in your sales funnel.
When designing a tripwire for your business, try to choose something that gives customers value – like a free product, a free trial, or a swag item. If you’re looking for an example of an excellent tripwire, consider this example from Paula’s Choice. Paula’s Choice offers cheap sample packs of new products – which earns them reviews and repeat purchases.
#5. Offer a core product
Once customers have downloaded your lead magnet and purchased your tripwire, they are primed and ready for the real deal: your core offer.
A core offer is a product that your business is known for. It’s your most commonly bought item or your flagship software. If you’ve designed your lead magnet and tripwire’s well, purchasing your core offer will be a natural extension of a customer’s journey.
At this stage of the marketing optimization process, there are three methods you can use to sell your core offer.
- You can simply sell your goods as-is.
- You can offer a small one-time discount of 10 – 15% through a coupon. This strategy is best suited to higher-priced items, as it reduces the barriers that stop customers from purchasing.
- You can offer customers additional free goods with their purchase. This strategy is excellent to increase the perceived ‘value’ of your core offer.
Whichever you choose, the goal is to optimize the customer’s experience – creating loyalty that will turn new customers into regulars. As long as the customer is happy, you’re doing this stage right.
#6. Offer a profit maximizer
Once a customer has committed to buying your core offer, it’s time to leverage the trust you’ve built to increase the value of the customer’s transaction through a profit maximizer. In this stage, the goal is to offer customers products with a high profit margin (i.e., a profit maximizer).
Offering a profit maximizer may seem like a hard sell, but it’s actually pretty easy. Here are three simple ways you can sell your profit maximizers.
First, you can offer your core offer as part of a kit to create a profit maximizer. This kit should ideally include your core offer and 3 – 5 cross items that will enhance the experience of your core offer.
Second, you can offer you a profit maximizer as added extras after a customer has added your core item into their cart. This is the selling model used by iHerb.
Finally, you can upsell customers on a profit maximizer by offering them an extra special version of your core product. This works best with software and is the model used by Grammarly.
#7. Create a return path
Once customers have made their purchase, it’s time to draw them back into your sales funnel through a return path. A return path re-incentivizes customers to make a purchase, increasing their customer lifetime value (CLV).
There are many ways to create a return path, including:
- Email marketing
- Coupon codes
- Customer loyalty programs
- Social media offers
- Sales calls
- Ad retargeting
- Website live chat
Of course, the keyword here is ‘successful.’ During this stage, you will likely need to test out several return paths and track their success with key performance indicators (KPI’s). Tracking your KPIs will help you identify your most profitable return paths.
Once you’ve discovered a winning return path, stick to your guns and work on increasing transaction value per customer. It’s that simple.
The Secret to Killer Customer Value Optimization
Like all science-based marketing strategies, the key to creating a killer optimization strategy is straightforward but often overlooked.
It comes down to three words. Know your customers.
Every customer base has different needs, desires, and interests – meaning that the best strategies for you will depend on your audience. If you want to design a strategy that keeps customers coming back and keeps the money coming in, build a marketing optimization plan that prioritizes the number of transactions per customer and transaction value per customer.
As Hazel Edwards said: “ease your customer’s pain.”
Mark Quadros is a SaaS content marketer that helps brands create and distribute rad content. On a similar note, Mark loves content and contributes to several authoritative blogs like HubSpot, CoSchedule, Foundr, etc. Connect with him via LinkedIN or twitter.