Start At the Top to Optimize Your B-to-B E-Commerce LTV
Most companies think of optimizing lifetime value (LTV) as a post-sale initiative, for example, focusing on activities such as expansion, retention and upselling. This may sound like a reasonable strategy, but waiting until after a prospect becomes a customer is a mistake when it comes to increasing average lifetime account value. In reality, optimizing LTV starts at the very top of the funnel with high-quality lead generation.
Lifetime value of a customer is strongly correlated to the quality of a prospective account — i.e., how well the account fits your ideal customer profile (ICP). For nontransactional buying processes and solutions with any service-based component, lead quality impacts how your business must allocate human capital. Higher product cost, technical complexity and how many people will be affected by the product’s adoption in an organization are all factors that heighten the importance of high-quality leads for optimizing LTV.
Low-quality prospects will monopolize the valuable time of your sales and customer success teams. Closing and onboarding prospects that aren't a good fit can be laborious for sales. Handling unhappy customers is taxing for customer success. Low-quality customers are less likely to upgrade and more likely to churn. In this way, you can draw a straight line between higher-quality leads at the top of the funnel and increased LTV.
When done right, outbound marketing and sales enable companies to proactively target customers that will be more likely to sign, succeed and stay. Conversion rates at the top of the funnel may be lower, but ultimately the pipeline will look healthier in the long run. With high-quality lead generation, marketing and sales teams can ensure their resources are directed at the segments of their total addressable market that are most likely to see success.
Moving Up Market
Another important trend we're seeing is companies looking to accelerate revenue growth. Many SaaS companies aspire to move up market — i.e., sell bigger deals to bigger customers. When this is the case, it can take some time to turn the metaphorical "inbound cruise ship" in a new direction. You have to create new content that addresses new challenges for a new audience; you have to wait six months or more for organic search traction; you have to put in a lot of work to get your updated messaging in front of the right people. It can be slow and arduous. Outbound, on the other hand, is a bit quicker. With the right leads in hand, a SDR can proactively reach out to the correct decision makers and influencers.
The stakes are also higher when you move up market. Typically bigger deals take longer to sell, require more marketing through points to shepherd through the buying process, and often involve a service-oriented component that doesn't scale perfectly. Signing bad customers as you move up market is bad for business. A dollar isn't always just a dollar. In recurring revenue based business models, you must consider the long-term value of customers, not just the initial deal size.
Of course, building value at all stages of the buyer journey is no longer just a strategy, it's a marketing best practice. If you’re a successful B-to-B marketer, you can build value by identifying the unique attributes of your most profitable customer segments. Early in the LTV optimization process, you can identify which prospective customers are likely to buy and see value in their product or service over the long term.
To be effective at targeting, you need to identify and profile your key accounts and contacts with the greatest likelihood of buying. Begin by defining all the main characteristics of the optimum target accounts and look at your most successful customers — i.e., the type you want sell to over and over again. Extrapolate the data to create this new target persona that you can use as a benchmark for evaluating potential new accounts. Identify what this ideal customer cares about.
Given the need to differentiate your product and acquire customers faster than your competition, personalization is critical. The key to personalization is micro segmentation because you can personalize at scale with this approach. It should be tied to specific personal pain points.
You can tailor messages to build product value if you have the right data readily available. Once you have your ideal customer profile, and outlined criteria for your top-performing segments, you can now build value with highly targeted, personalized messaging. Also, you will want to identify “buying signals.” We look at several indicators such as number of salespeople; number of product verticals launched each fiscal year; and regional hiring trends.
By focusing on high-quality leads to increase your LTV, you can better use your resources more effectively, and you can track your marketing and sales strategies and proactively address customer churn. Increasing average LTV is a top priority for most businesses. Increasing lead quality should be as well.
William Wickey is the head of content and media strategy at LeadGenius, an end-to-end sales solution that provides companies with a way to generate, qualify, deliver and convert leads.