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LTV can be improved by using AI (artificial intelligence) and data!

Many people are wondering how to increase LTV (customer lifetime value). By utilizing AI (artificial intelligence) and data, even those without specialized knowledge can improve LTV.

To improve LTV, continuous efforts from the customer’s point of view are more important than superficial techniques. In this article, we will explain how to improve LTV using AI and data.

[LTV is the total amount of profit that a customer brings to a company]

LTV indicates “the total amount of profit that customers bring to the company” and is one of the important indicators in management. First, let’s check the LTV.

●Important indicators for companies to continue their business in the future

In today’s world where one-to-one marketing has become effective with the advancement of IT, LTV is an important indicator for improving corporate performance and business continuity.

If the LTV is high, stable management is possible even for companies that are known only to those in the know. Small businesses also have opportunities. Even for niche products and services, if you appeal to your persona, you can increase the number of customers who continue to use your products and services for a long time, and increase LTV.

● LTV calculation method

The method of calculating LTV varies depending on the product. The following calculation formula is one of the representative calculation methods.

  1. Average unit price per customer x Average purchase frequency x Rate of return x Duration
  2. Customer’s annual transaction amount x rate of return x customer’s continuous years

The first method can be used for products that are purchased repeatedly, such as consumables, and the second method can be used for companies that handle services.

[5 reasons why AI and data utilization are effective in improving LTV]

AI and data utilization are effective in improving LTV. From here, we will explain the effectiveness of AI and data utilization by dividing it into five reasons.

Able to make proposals tailored to each customer

Utilizing AI makes it possible to make proposals tailored to each customer, which can help improve LTV. Let’s take a look at two reasons for this.

 ・Proposals can be made according to tastes

By using AI in your service, you can make proposals that match customer preferences. It can be realized by utilizing a wide variety of data accumulated in your company. “Personalization”, which presents necessary information and similar/related products for each user, is a representative function.

If you can check the products you like without looking for them, the purchase rate will increase. It will also contribute to improving LTV.

 ・Proposals based on lifestyle can be made

Factors that determine consumer behavior include lifestyle factors such as age and family structure. By utilizing AI, it is possible to make appropriate proposals even when there are many factors to consider. Proposals that match each customer can increase customer satisfaction and contribute to improving LTV.

-Increase customer loyalty

Continuous provision of good products and services leads to improved customer loyalty. Preferential treatment for loyal customers is a typical example and a common practice. However, to improve LTV, it is also important to provide a good customer experience for everyone. You can get the effect of increasing your company’s fans.

By utilizing AI, it is possible to take appropriate measures for each customer. By providing the value that customers want, it is possible to improve customer loyalty and LTV.

You can get more profit with limited management resources

In business operations, it is ideal to make effective use of limited management resources and aim for a large amount of profit. In this day and age, there are ways to improve LTV without having to distribute ads to everyone at once.

Leverage AI and data to find customers with high LTV. By sending targeted messages instead of delivering ads uniformly, you can take measures with high cost performance. It will also contribute to improving LTV.

You can find customers who are likely to have high LTV in advance and approach them intensively

One of the effectiveness of AI and data utilization is the ability to predict future LTV. Calculate future LTV using AI based on customer data held by companies. Customers who are likely to have a high LTV can be visualized at an early stage, and by approaching them intensively, they can be cultivated into loyal customers.

By utilizing AI and data, we will realize sales promotion activities that take the initiative. Since you can approach those who want your products and services, it is possible to achieve both customer satisfaction and business performance improvement.

– Lower churn rate

In the stock business, cancellation is something you want to avoid as much as possible. By utilizing AI, it is possible to quickly identify customers with high cancellation risk and visualize the reasons. Since you can grasp the customer’s dissatisfaction in advance, you can quickly take appropriate measures against customers who may cancel the contract.

By implementing measures to resolve dissatisfaction, it is possible to prevent a decrease in the churn rate and a decrease in income. It also helps improve LTV.

[7 ways to improve LTV using AI and data]

LTV improvement cannot be expected simply by using AI and data indiscriminately. Choosing the right method is key to improving your LTV. From here, we will take up and explain seven ways to improve LTV by utilizing AI and data.

●Choose the system that matches your company

The use of IT systems is essential for the utilization of AI and data. In-house system development is difficult unless you are an IT company. Many companies will often choose from systems provided by IT companies.

On the other hand, the needs of the system differ greatly depending on the company. Understanding your needs in advance is an essential condition for selecting a system that matches your company.

Provide value that matches customer characteristics

Different people have different needs, even if they use the same service. Let’s use AI and data skillfully to understand the customer’s characteristics and desired value, and provide useful information. For example, the following measures can be taken using age, gender, purchase records and preferences.

  • Display of “recommended products”
  • Targeted distribution of information

Providing value that matches customer characteristics is effective in improving LTV.

Aim for upsells and cross-sells

Utilization of AI and data can also realize up-selling and cross-selling. These contribute to improving LTV.

In the first place, if you recognize that “if you want better products and services, the customer should approach you”, you will fall behind your competitors. This is because:

  • I don’t know related products or services
  • They do not know that your company provides products and services that solve problems
  • I am aware of the existence of related products and high-end services, but I can’t choose because I don’t understand the merits

Proactive information disclosure and recommendations for each customer are effective in improving LTV. If you can get the impression that “I didn’t know there was such a product or service”, the feasibility of upselling and cross-selling will increase. It will also lead to improved performance.

– Stimulate purchase intent

There may be many customers whose names are on your list but are in the following situations.

  • No additional purchases after initial purchase
  • No purchases or service usage for a long period of time

Excavating the purchase intention of the above people is directly linked to LTV improvement.

It is possible to know the cause by utilizing AI. By making suitable proposals for each customer, it leads to purchasing products and resuming use of services.

Provide specialized services to loyal customers and candidates

By using AI and data, you can also extract loyal customers and their candidates. Keeping these in-house is essential for improving LTV.

By utilizing AI and data, it is possible to accurately grasp the needs of loyal customers and take appropriate measures. As your revenue grows, your customers will love it too. This is a point that we would like to implement in order to realize ideal business operations.

●Used to improve service content

Manufacturers and service providers are sometimes blind to what their customers want. If you continue your business in this situation, you may lose out to the competition without knowing the reason for the deterioration in business performance. There is also a method of taking questionnaires, but the drawback is that opinions tend to be biased.

By acquiring a wide variety of data and analyzing it using AI, we can see the customer. It is possible to improve LTV by realizing the products and services that customers want, as well as the fee structure.

Provide appropriate information to customers who are likely to cancel or withdraw from membership

Customers who decide to cancel or withdraw have a certain behavior pattern. Declining login and service usage is the main sign. It is not good for both parties if the contract is canceled without knowing the good points of the service that your company provides. However, it is the reality that it is difficult to retain at the stage of receiving a cancellation request.

By utilizing AI and data, it is possible to convey the benefits of continuing a contract to customers who are likely to cancel or withdraw. Providing proactive information contributes to lowering the churn rate.

[Utilize AI and data to win the hearts of customers and improve LTV]

To improve LTV, marketing tailored to each customer is important. By utilizing AI and data, you can win the hearts of your customers and improve their LTV. Companies that respond quickly will be in an advantageous position, so please consider using this opportunity.


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