There are many KPIs used in the contact centre industry to increase efficiency or improve customer satisfaction. Besides the frequently used KPIs, such as AHT (Average Handling Time), Service Level, FCR (First Contact Resolution), CSAT (Customer Satisfaction Index), NPS (Net Promoter Score), there are also KPIs that are not that common and are not utilized by some companies.
One index that indicates how much customer loyalty benefits the company is the CLV (Customer Lifetime Value).
This key figure indicates the value of how much a customer is expected to bring to the company over the course of the contract term (and beyond). Somewhat exaggerated: „How much is the customer worth to the company?“.
It looks at whether the company’s costs, i.e. product costs, expenses for customer acquisition, etc., are in a positive balance to the income from purchases by the customer over the duration of the business relationship.
There are various calculation options, e.g. it is also possible to forecast the future to a certain extend. There are ways to calculate if the continuation of a business relationship with a customer is still profitable for the company far in the future, should the customer keep their buying behaviour.
Use of CLV in the contact centre industry
In the contact centre industry, CLV is mainly used in the sales area. In various approaches, conclusions can be drawn about which customer segments are particularly profitable or less profitable, and which products contribute to the CLV in a positive way.
These findings are of great value in order to find out e. g. which customer groups can be bound to the company in the long term through cross-selling.
On the other hand, it can also be used to show which products tend to harm the company in the long run, because the investments are too high and do not pay off by the income they generate.
This information is therefore also of immense value for customer support and can be used to increase both, customer satisfaction and company revenues in various areas.
Here are just a few examples of how CLV is used in the contact centre:
Prioritisation of customers
In call routing, prioritisation can be set for customers with certain CLVs, or they can be assigned to specialist teams. By doing this companies can make sure that these important customers are optimally supported, which increases the likelihood that they will remain loyal to the company as satisfied customers.
Training of agents
If agents are recommended for specialist teams, they will of course need training that prepares them optimally.
But other conclusions can also be drawn. For example, agents can be given the necessary knowledge about which customer and product types are best suited for cross-selling opportunities, and can be targeted through constantly updated knowledge databases.
Adjusting staff commissions
It goes without saying that long-term contracts with a good turnover should be preferentially referred to the clientele. The assessment from the CLV analysis makes it easy to rank the rates according to their value to the company. Companies regularly adjust the distribution of employee commissions to changing circumstances so that sales staff are motivated to advise customers on higher-value alternatives.
Competition between teams or service providers
Just like the value of the customer, the gain in value can also be determined in a defined period of time. This way, teams or service providers can not only be managed on pieces, but CLV can also be used as a KPI for better comparability and, by setting benchmarks, also as an incentive for higher-value sales.
What are the prerequisites?
To be able to calculate the CLV, a sufficiently large customer base is necessary, as well as well-maintained CRM systems that allocate purchases cleanly and reliably to the correct customers.
There must be reliable data on customer histories, i.e. which purchases were made at which price and for how long customers have been in a business relationship with the company on average. There must be reliable estimates of customers‘ buying behaviour and, above all, how the market is developing.
These estimates can be quite uncertain, as events can occur that can change consumer behaviour at short notice. The Corona pandemic is a dramatic example of changing consumer behaviour.
Despite these uncertainties, the CLV is a very important key figure, especially in large companies. By having as large a customer base, estimates of purchasing behaviour become more reliable, since fluctuations in consumption behaviour are more likely to be compensated for by a large number of comparable customers.
In the contact centre industry, CLV is a powerful KPI. Not considered on its own, but in combination with other KPIs, it helps to manage the resources deployed in a more customer-focused way with a view to the long-term success of the company. For companies with a large pool of customers and a corresponding amount of data, the collection of this data and using the CLV for adjusting portfolio and strategy is profitable in any case.
Simon Rewerts – Consultant