OKRs to Increase Customer Lifetime Value (CLTV)

It’s no more a bag of sunshine and a pot of gold at the end of the rainbow. Welcome 2023, a year of compressed valuations, slashing budgets, grieving layoffs, and spiraling inflation that just got us thinking is the worst yet to come.???

Crisis gets the best of us, as they say, and during war times, the need to focus on customer value and retention has surpassed many strategies.??

According to an article by Neil Patel,?it takes 7X more to acquire new customers than to retain existing customers.??

An important metric that rules the health of subscription businesses is?Customer Lifetime Value (CLTV).

What is CLTV??

Customer Lifetime Value (CLTV) is the average revenue that you can make from the customer before they churn.???

What makes CLTV so important??

CLTV is an important metric because unless we know how much we would make from a customer, we would not know how much to spend to acquire the customer. According to?David Skok, a guiding principle for CLTV is LTV = 3x CAC (cost of customer acquisition). This essentially means, for every dollar that you place to acquire a customer, you get back 3.?

Companies that spend relentlessly to acquire new customers, and have low lifetime value, will bleed on profitability.??

According to?Paddle, one of the simplest ways to calculate CLTV is:?

CLV = Average (monthly) revenue per user (ARPU) x average contract length (ACL)?or in other words, CLTV can be calculated by the Value of the customer to the business * average lifetime of the customer.

Churn Rate and CLTV are highly influenced by each other. The longer your customers stay with you, the lower the churn rate and the higher the LTV. Bliss! This is definitely a zone you would want your business to be in.??

Here are top OKRs examples for increasing CLTV.??

While writing OKRs, one would need to think intently of business value and how to measure it with value add metrics.

Objectives?tell you “What do we need to achieve?”?

Objective statements start with a?Verb + What would you like to accomplish + Business Value?

Key Results?focus on “How do we measure success?”?

Key Results Start with a?Verb + Metric to be measured and improved + movement from X to Y?

An OKR to improve Onboarding experience: Going by the strategy on how a killer onboarding experience is key to increasing customer value.??

Objective: Improve onboarding experience to improve weekly product adoption.?

KR 1:?Reduce page download speed from 6 seconds to 1 second?

KR 2:?Increase key feature activation from 20% to 80%

KR 3:?Increase week 1 adoption from 3 minutes to 15 minutes?

The activities for this OKR would intently look at which features are of the highest value during week 1 of a new user or scrupulously place the right onboarding workflow to make product awareness a no-brainer.???

When it comes to up-sells and cross-sells, one can look at customer segmentation and focus on the target customers. Upselling as a strategy would not work for those customers who have poor product adoption.??

Objective: Focus on top 10 ‘power’ customers to expand revenues through upselling?

KR 1:?Increase high-value touchpoints from 1 to 3 per quarter?

KR 2:?Reduce time to respond to support tickets from 2 hours to 30 minutes?

KR 3:?Launch Top Priority Customer Club membership by March 31st??

KR 4:?Increase expansion revenue from USD 20K to 55K ARR???

Activities that link to these Key Results could revolve around QBRs, priority access to technical support, email notifications to proactively inform customers about usage or user addition or even inviting these power users as webinar speakers.??

Here’s an example of how Cross-sell can revolve around strategic accounts.??

Objective: Increase new offerings in strategic accounts to drive expansion revenue

KR 1:?Increase product adoption (DAU/MAU) in strategic accounts from 20% to 60%

KR 2:?Improve Customer Pulse Score from 3.5 to 4.5?

KR 3:?Add beta users to new offerings from 100 to 2000

KR 4:?Accelerate beta trial to buy from 3% to 8%?

You can access our range of 100+ OKR templates on?Fitbots OKRs?with just a click!??

To conclude, keeping an eye on CLTV can make your business a revenue machine, and a hallmark of companies that are built to last.?Click here to read our full article and find 5 strategies to increase CLTV.

Fitbots has worked with over 5,000+ teams, by helping them get OKRs right and tracking powerful insights on our OKRs software. Our AI Assist feature simplified OKR writing in a matter of seconds, helping leaders to focus on action rather than verbose discussions. Click here to?book a call with our OKRs expert?on how we can help you get OKRs right, and manage them with powerful insights.?