With billions at stake, and shifting subscription models the norm, in the quest for optimal revenue and retention per sub it is critical for the acquisition team to get it right when looking to boost Customer Lifetime Value (CLTV).

In the past 10 years the subscription economy has grown 4.6 times faster than the S&P 500, outpacing even modest projections. In 2022, a study by Juniper Research “estimates that the current subscription economy market is currently worth over $275 billion,” across physical and digital goods and services.

One persistent myth in subscription services is that increasing CLTV is domain-specific to engagement and retention. It’s true that teams in charge of engagement and retention are tasked with keeping customers engaged with the product or service and taking pre-emptive measures to reduce churn, thereby increasing CLTV. Often, acquisition isn’t even mentioned.

But, overlooking acquisition in trying to boost CLTV can result in missed profits and opportunities. And boosted CLTV leads to boosted stakeholder satisfaction!

Let’s define Customer Lifetime Value (CLTV) and how acquisition can increase this KPI further.

CLTV = Average Order Value X Number of Transactions X Retention Time Period X Profit Margin

1. Targeted, tailored campaigns based on buyer personas and customer segmentation:

Segment your customers by high CLTV and target tailored campaigns to them. Using data science models, a company can analyse existing customer data and discover the behaviours of their highest-value CLTV. Then,  categorize a new lead before they have even asked for any details. For instance, specific behaviours on a website by a new lead may indicate they will fall into a high-value CLTV segment, and so you can automatically adjust messaging or offers accordingly.

Working example: If a company identifies that men aged 20-25 have higher CLTV than those aged 35-40, they are able to devise marketing and acquisition strategies that will appeal to the younger age group – perhaps introducing TikTok as a new marketing channel.

Buyer persona: A detailed description of an ideal customer including demographics, interests, lifestyle, etc. Brands may have multiple buyer personas to target.

Customer segmentation: dividing customers into groups, based on common characteristics, so businesses can increase marketing campaigns’ effectiveness.

2. Channel spend to higher CLTV potential:

Subscription businesses acquire customers across a number of different acquisition channels such as social, partners, agents, email, billboards, etc. If acquisition can identify which channels are bringing in more customers – with higher CLTV potential – they can optimize spend on these channels, so reducing cost per acquisition.

Working example: Let’s say that Company Y was able to identify that email targeting was acquiring customers with higher CLTV in Asia as compared to Instagram, despite high quality content on each channel. As such, the company reduced spend on Instagram by 30% and reallocated it to email, increasing subscriptions only by 2% over the social channel – but increasing customer lifetime value by 32%.

3. Harness AI and ML to analyze CLTV to reduce CAC

Machine learning can calculate CLTV for acquired customers once they subscribe, but It can also provide early indicators of CLTV for leads based on limited information in their engagement and browsing history.

The data picture expands if these leads become prospects through registering, without necessarily converting to a paid customer. If the prospect can be individually tracked across different digital channels, ML-driven CLTV estimations can become even more accurate. This delivers great insight that helps to identify the probability of a conversion. His also means you can better personalize offers via specific touch points, timing, and messaging.

Working example: Company Z classifies customers into four segments based on their probability of conversion – more than 90%, 75% to 90%, 60% to 75%, and below 60%. Their acquisition strategy then personalizes offers for each segment by providing a two months free subscription offer, 10% discount, 15% discount, and no discount, respectively. The result? The business reduces Customer Acquisition Cost (CAC). 

4. Make referral programs and gift subscriptions part of your toolkit

Referral programs use existing customers as brand advocates to their friends, family, and other networks, to significantly reduce acquisition cost, among other benefits.

According Friendbuy, an optimized referral program can:

  • Drive at least 5-15%, to up to 30% of revenues
  • Convert five times faster
  • Offer 25 times return on spend
  • And achieve five times greater CLTV than other channels.

Gift subscriptions also bring in new customers when they renew after the gift subscription expires, so significantly enhancing CLTV.

5. Personalized, flexible pricing to re-engage buyers or lost customers

Flexible pricing involves adjusting discounts or offers for certain categories and products. It considers a customer’s purchasing history and adjusts discounts or offers based on previous purchases and/or behaviours. This is particularly useful for reactivations or winning back lost customers.

Trial offers allow prospects to test your product or service before committing to a subscription, which can significantly increase acquisition – depending on the prospect’s experience during the trial. Provided they have a positive experience and high engagement, they tend to convert into loyal customers, thereby increasing CLTV.

In a nutshell – embrace test-learn-evolve to acquire more customers and keep them

The acquisition team must keep track of multiple critical success metrics, including, but not limited to:

  • Number of conversions per campaign
  • Engagement score of new starts
  • Cost per acquisition

With these numbers in hand, they can refine their data science model to ensure the strategies outlined above work efficiently and effectively.

Acrotrend helps businesses hone in on the data points that indicate Customer Lifetime Value, for both individuals and customer segmented tracking across multiple channels. We can help you refine your models, and develop advanced strategies that not only grow profit, but subscriptions, and customer satisfaction.