Customer lifetime value (CLV) is the driving force behind profitability, sustained revenue, and customer retention for vertical SaaS companies. These software providers cater to niche markets. As such, holding onto existing customers and getting the most out of customer relationships can offer more perks than acquiring new ones in these markets.

That’s why vertical SaaS providers should always aim for higher CLV. A high CLV means more loyal customers, greater repeat business, better profit margins, and healthier bottom line. Customers stay longer with the company and contribute or avail of more services and products.

Customer acquisition cost (CAC) is high in the vertical SaaS space, so focusing on CLV optimization is essential to offset acquisition costs, reduce customer churn rates, and drive sustained business growth. In this article, we’ll go over a few tips to help you increase CLV and set your SaaS business model up for long-term success.

Understanding Customer Lifetime Value (CLV)

Customer lifetime value is the total revenue a customer generates throughout the business relationship. This is known as historic CLV. We can also look at CLV from a predictive angle i.e. calculate how much revenue your business can expect from a customer throughout its relationship with them.

The customer lifetime value formula is calculated by multiplying the purchase count with the value of each purchase and the length or predicted lifespan of the relationship with the customer. CLV is an important metric to track as it measures the long-term value of your customer base.

CLV = Average purchase frequency x Average order Value x Average customer lifespan

CAC measures the amount spent on acquiring a new customer while monthly recurring revenue (MRR) tracks the monthly income. Both are crucial metrics for any business but they give a short-term view into the health of your business. 

Adding CLV to your list of metrics gives you a comprehensive view of how well your business is doing. Note that CLV is also often known as lifetime value or LTV.

How to Increase Customer Lifetime Value

Now that you understand what CLV means and why it’s important, let’s look at how you can go about increasing it.

Tip 1: Offer Tailored Solutions and Upsell Opportunities

One of the best ways to improve CLV is by offering tailored solutions for your customers’ needs. This is good news for vertical SaaS businesses as this comes naturally to them.

Vertical SaaS is all about providing specific services for niche industries. You can take this one step further and develop add-ons, specialized features, and specific workflows that add more value to your core product for different customer segments.

With a deep knowledge of the industry, you can create solutions to address unique challenges your customers face making it easier for you to upsell and cross-sell to existing clients. 

As your customers’ businesses grow, their needs may evolve and new requirements may arise. Offering advanced, industry-specific tools as and when they need them will make your customers want to stay loyal to your company. Your business grows as theirs grows! 

Apart from opening up new revenue streams by upselling and cross-selling, you can also boost customer loyalty and CLV.  

Tip 2: Implement Subscription Tiers and Bundling

Creating different subscription plans or tiers is a great way to cater to customers’ evolving needs. Customers can choose the tier that works best for them for their current situation. They can easily switch tiers later on as their business needs change.

You can bundle additional features and software to your core product in the more expensive subscription tiers you offer. As your clients’ business grows and their processes become more complex, they’ll require additional features, advanced functions, and extra support. They can avail of all this by upgrading to higher subscription tiers.

Bundling also makes subscription tiers more appealing to businesses as they can obtain a large range of features they might need for a reasonable price. Make sure you’re bundling related features together so customers are more likely to get the solutions they’re actually looking for. This in turn will ensure better customer satisfaction and thereby, better CLV. 

Tip 3: Improve Onboarding and Customer Support

Vertical SaaS providers are sought after for their industry expertise and ability to solve niche problems. Know that your customers have signed up for your products and services because they need solutions to problems they likely have little knowledge about. Hence, they need all the support you can provide during onboarding.

The customer’s initial experience with your onboarding process will set the tone for your relationship with them. Make sure the process is streamlined and that customers can easily contact your support staff if required. They’d want to stick around longer with a company that prevents frustration from building up during onboarding.

For vertical SaaS providers, it is best to provide easy-to-understand manuals, interactive walkthroughs, step-by-step tutorials, and even personalized support for your customers to make onboarding as stress-free as possible. A streamlined onboarding also ensures that your product is up and running at the customer’s end much faster so that they can see its benefits quicker. 

Tip 4: Embed Fintech and Other Payment Processing Services

Regardless of the industry a company is in, payments are an important and common factor. If a business cannot collect or process payments, it is as good as dead. Hence, businesses are always on the lookout for payment processing solutions on top of the software they already have for core processes.

So why not integrate fintech and payment processing services into your vertical SaaS platform? It is an essential process and having embedded payments will remove the hassle your customers will have to go through to find compatible payment processing software and then integrate with existing software.

Additionally, embedded payments will create a seamless checkout experience for the end user as they won’t have to leave the SaaS platform to complete payments. This improves the customer experience and boosts brand loyalty. Integrated fintech is also an excellent additional revenue source.

You’ll be offering a comprehensive SaaS application to your customers so they won’t feel the need to switch to a competitor's product. They can rely on your product for all critical tasks including payment processing. 

If you’re looking for a platform that consolidates all your Fintech integrations, services, and data, look no further than Preczn. It offers the expertise and tools you need with respect to payment migration and revenue enablement.

Tip 5: Foster a Strong Customer Community and Engagement

Customers like to feel that companies care about their issues and take them seriously. What better way to show that your business cares for its clients than by creating online communities on forums and social media to solicit customer feedback, connect clients, and provide support?

These communities not only help businesses connect with their customers but also encourage them to connect with and help each other. It's a great way for them to share insights, best practices, and tips so everyone can get more value from your product.

A strong community also helps customers feel more connected to the brand, increasing customer loyalty. It is also a great resource for quick and direct feedback, which is crucial to help you improve your product or think of new features that need to be built in the upcoming releases.  

Tip 6: Personalize Communication and Customer Experience

Data is your friend when it comes to mapping the touchpoints and personalizing the customer journey. With data-driven insights into customer preferences, behaviors, and needs, your business can send customized product recommendations, marketing content, and support to your customers.

“Tailor-made” is the buzzword for vertical SaaS and extending this to your email marketing efforts will make customers feel valued. By analyzing customer data, you can not only make the communication more engaging but also more relevant. 

For example, based on past interactions with your support staff, you can send customers product recommendations that they actually need.

This helps clients solve pressing issues, makes them feel heard and valued, and increases customer satisfaction. When customers feel like they’re getting personalized solutions, they want to continue working with your company.

Tip 7: Analyze Customer Data for Product Enhancement

If you’re looking to increase CLV, you can’t neglect your customers once you’ve onboarded them. Customer data can be a treasure trove of useful information if stored and analyzed correctly.

You can identify areas of improvement and opportunities for new features by analyzing customer data. By closely analyzing how customers are interacting with your platform, you can also identify roadblocks, pain points, and redundancies that you can fix in the next iteration of your application.

Customer support interactions and feedback can also be used to figure out common problems that a large chunk of your user base has encountered. This can help with product enhancement that keeps your products relevant and competitive. 

When customers realize that your company is addressing their issues, they will feel like their opinions matter which ultimately helps to improve customer loyalty and retention. This can even translate to more word-of-mouth referrals. 

Tip 8: Provide Industry-Specific Value and Thought Leadership

To operate in the vertical SaaS industry and provide niche solutions in specific industries, you need deep knowledge about the industry. Use this knowledge and expertise to position your business as an expert and trustworthy source in the industry.

Share your knowledge through valuable content like thought leadership pieces, tips, and best practices. Don’t resort to generic content pieces that many others have already published. You’ll need to put more thought and effort into your content to make it unique and useful but it’ll be worth it in the end.

Your content marketing strategy should include hosting webinars, publishing blog posts, whitepapers, case studies, etc., and creating video tutorials. Quality trumps quantity — and quality content pieces will set you apart as a thought leader.

Being a trusted brand and leader in the industry enhances the perceived value of your SaaS products. It also increases brand awareness and positions your business as the go-to company for specific SaaS solutions. All this can have a positive effect on your CLV. 

Final Words

Although we’ve listed eight strategies that can help you boost CLV, you can’t successfully implement them all at once. Start with one, get a good grip on it, and you’ll start seeing positive results. Once you can sustain a single strategy and get good results, move on to the next one.

Ultimately, boosting CLV boils down to creating better customer experiences by building communities, undertaking ongoing product enhancements, and personalizing solutions and communication.