Saas Trends

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Why Educating Your Customers Results In Higher LTV

Customer lifetime value is a critical success metric. Only when you know how much your customers are “worth” can you determine how much you’re able to spend acquiring them.

The benefits of analyzing LTV go beyond sales and marketing. When you look at customer experience through the lens of LTV, you gain a clearer understanding of which CX investments will produce the biggest top-line impact.

One CX tactic that measurably improves LTV is customer education—via onboarding, ongoing product training, a customer community, or an online knowledge base.

Why Educating Your Customers Results In Higher LTV

Why is it that more educated customers are more valuable?

They are more likely to buy in the first place

Better-educated customers are more likely to buy. And when they do, the odds are good they’ll spend more.

That was the observation of one inSided customer, as profiled here. The company, which we can’t name for confidentiality reasons, saw traffic from its online community convert at a 4X higher rate than traffic from its social ad campaigns.

There are benefits beyond conversion. Other inSided customers have reported that their communities drive larger orders at their online stores.

What’s behind these enhanced e-commerce dynamics? People who visit a community before shopping consult real product users. They can get tips on what to buy, or have their questions answered—so when it comes time to purchase, they’re more confident in what they want.

They’re more satisfied

When customers make an informed decision, they’re more likely to be satisfied post-purchase. That, in turn, makes them more likely to recommend you to others.

To maximize this kind of advocacy, It’s important not to neglect customer relationships after the sale. One approach is to “onboard” customers—a common practice in B2B but a relatively rare one in B2C.

Already, best-in-class brands ensure their new customers know what to expect on their first bills, or how to request support. Heading off these common pain points early on reduces support tickets, while also setting a positive tone for the future.

These steps boost customer satisfaction in the first 90 days of the customer relationship—a “make or break” period for many businesses. Author John Warrillow writes in Inc. that getting customers comfortable in this timeframe results in up to 300 percent higher LTV.

Educating your customers early in your relationship not only ensures they get maximum value from your product—it shows them that you’re committed to their success.

They’re more loyal

Recognizing that your success is contingent on your customers’ success may be a huge cultural shift for your brand. But it’s an approach that can pay big dividends in customer-centric industries.

One great example is T-Mobile, the No.3 player in the US wireless market. Just a few years ago, T-Mobile’s subscriber base was significantly smaller. By simplifying pricing, offering perks like complimentary Netflix subscriptions, and investing in its network, T-Mobile has gained millions of new customers, posting the wireless industry’s fastest revenue growth in the process.

What T-Mobile has rejected is “business as usual”: long contracts, high fees, opaque pricing, and limited transparency. Its marketing tagline—“The Un-Carrier”—reflects its commitment to being different.

And customer churn, a critical metric in the competitive telecom sector, has dropped steadily—to a record-low 1.1 percent (for postpaid subscriptions) in the second quarter of 2017.

T-Mobile’s success reflects the value of investing in systems that increase loyalty. The goal should be to surprise and delight customers—whether through freebies or programs that educate and inspire.

Because it’s so much more expensive to acquire a new customer than retain an existing one, these kinds of loyalty investments offer massive ROI. Making customers happy, it turns out, is great business.