Customer Value Optimization: Follow these 5 Steps - Review

Photo by Chris Liverani on Unsplash

In this article, we will discuss aboout Customer Value Optimization.

Customer acquisition can be a lenghty and costly process.

Once the customer is acquired, it is therefore very important the high focus is given in retaining those customers.

One key to customer retention is customer value optimization.

What is Customer Value Optimization

We can understand customer value optimization with the help of a model.

The best part being that this model can be applied to a variety of industries.

It can range from ecommerce to business-to-business.

So the five steps for customer value optimization are:

1. Identification of the market you are in.

2. Generation of Leads.

3. Conversion of Lead into a Buyer.

4. Turning the buyer to a multiple purchaser.

5. Return path of the customers.

It is a foundational frameword that works across many industries.

Let's explore these 5 steps in some detail.

Step 1: Market Identification

One of the first steps is to know and understand that what you are offering is what people actually want.

Whether it is a product you're selling or a service that you' re offering.

This is one of the longest step in the process.

Here, you have to contruct statement of value.

We articulate the core offering.

We even identify the customer base.

There can be a chart for this.

On one side, we put the "before" state of the customers.

The state ucustomers are in before using your product.

And on the other side, we put the "after" state.

How does after state differ from the beore state.

The difference in the after state and before state is the value you are delivering to the customer.

Step 2: Lead Magnet Creation

The next step is identifying if the customer really wants our product.

Though we have a clear difference in the before and after state of the customers, it does not necessarily mean that the customers want it.

This can be because the customer do not know you yet.

Or, they are not ready to trust you with their financial information like crefit card.

CXL Institute defines Lead Magnet as -

"A highly specific chunk of information that is highly actionable and used in exchange for an opt-in."

Among the key features of a lead magnet are points like that -

It is highly actionable, has high perceived value, has high actual value, and is easy to consume by the customers.

Examples of lead magnets can be checklists, case studies, free downloads, and free software trials.

It can also include quizzes, tests and assessments.

One thing very important to understand here is what NOT is an example of a lead magnet.

E-book is not a lead magnet. One of the key reasons being that it takes a long time to consume it.

There is no immediate value to customers.

One more bad example of a lead magnet is newsletter opt-in. One cannot know about customers with this opt-in.

Step 3: Setting up a Trip Wire

In this step, the conversion takes place of a prospect into a buyer.

The idea is that if someone is ready to spend even a small amount with you, they become ready to spend much more with you.

CXL Institute defines Trip wire as -

"A tempting offer that is intended to convert prospects to buyers".

The purpose of trip wire is to change the relationship between you visitor from prospect to a buyer.

But it can in the process alleviate acquisition costs.

In my personal experience, I have seen my trust go high with the provider once I had made the first successful payment.

I became more inclined to make further purchases.

Step 4: Creating Profit Maximizers

This step comes into play when someone has made a purchase of your core offering.

We have different types of profit maximizers that we can use.

Examples are cross-selling, up-selling, subscriptions.

One related term used by CXL Institute is Slack Adjuster. It is defined by them as -

"A high ticket item intended to appeal to a small percentage of customers in order to increase profit potential".

This tep needs to be used by businesses more to maximize their profit margins.

This would be different for different businesses.

Step 5: The Return Path

This is the last step among the five step framework for customer value optimization.

In this step we help customers that have fallen off on any step to come back and be the part of the funnel.

We can do this by following three things.

One is Automated follow-up or the e-mail marketing.

We can do this in a strategic and constant manner.

Another good way is to provide an exit offer.

When the customer or potential customers is trying to leave the website.

The third thing which we can do is remarketing.

Remarketing through display ads in the form of banner either on webstes or social media..

This is for those people who have seen your website and offer, but have not made a purchase decision yet.

Conclusion

This article is from the learnings at CXL Institute from their Conversion Optimization Minidegree.

We were able to discuss the five step framework that we can use in any industry for customer value optimization.

This is a very good framework to follow to maximize qualified and leads and also to maximize our profits.

Based on the industry, the examples used in each step will be different.

We start deploying the framweork by first identifying the market we are trying to enter or work in.

We then try to explore if people like our product and want it to solve their problems.

Once we are clear on that, we then use tools for making lead magnets and leading them to the trip wire step.

In the step of trip wire, we focus on converting the lead or prospect into a true buyer.

After this step, we focus on maximizing the profits from the existing customers, also called slack adjuster.

Finally, we try to identify if there are any drop outs in the funnel and try to re approach them via different methods explained in Step 5.

The author of this article can be reached at Linkedin.