4 Surefire Ways To Increase Customer Lifetime Value
Have you been draining your brain and pockets to keep the sustainable growth of your eCommerce business?
Pouring money into acquiring new customers is the foundation of marketing. But, it’s not a strategy that’s going to help you long-term.
If you truly want to grow your eCommerce revenue, you’ll need to increase Customer Lifetime Value.
Why? Because you’ll make more, without depending on 24/7/365 lead generation.
We know you’re busy, so let’s dive straight into the 4 proven ways to boost your CLV.
1. Calculate CLV
To increase CLV, first, you need to know it. And by that, we mean to calculate it.
Depending on the depth you’re willing to go, CLV calculation varies.
If you want to get a very accurate estimation, then you’ll need to make your calculation more detailed, including more factors.
If you’re aiming for a decent estimation, without feeling like you’re studying rocket science, the factors to include in your formula are:
- Average Order Value — the average amount of money a customer spends on a purchase in a specific timeframe (Total Customer Spend / Number of Orders).
- Average Order Frequency — the average time needed for a customer to make a new purchase in that specific time period. (Time Period / Number of Orders).
- Customer Lifespan — the length of time a customer continues buying from you.
Customer Lifetime Value = AOV * AOF * CL
2. Segment CLVs
Once you’ve calculated every buyer’s CLV, the next task on the list is to create segments based on these values.
Why? Because you need to categorize your buyers based on their purchase power.
Spending the majority of your budget on targeting low-value customers is going to have a big impact on your expenses, and a small impact on your revenues.
Essentially, what you want is to maximize the return on every single dollar you spend on making your customers buy more.
Creating CLV-based segments is going to make the process much easier and much more effective.
You’ll know which buyers are most likely to make larger purchases and which ones will probably need more time, or more incentives to convert again.
The 3 fundamental CLV-based segments to implement are:
- One-time Buyers - the less profitable buyers. Costs the most to acquire. Return the less profit.
- Repeat Buyers - any buyer with more than 1 purchase. They have a significant remarketing and upselling potential.
- Loyal Buyers - your big-money-makers. The audience segment you should reward the most. The more you care for them, the more they’ll give back to you.
3. Increase The Average Order Value
Now that you’ve categorized your buyers, let’s get a scoop on how you can capitalize on these segments and increase your Customer Lifetime Value.
And as the title already spoiled it, the most cost-effective way to increase your brand’s Customer Lifetime Value is to boost the Average Order Value.
There're a couple of ways to achieve this.
a) Upsell with complementary products
When a visitor adds a product to their cart, offer a sale on a relevant, more high-priced product. For example, when someone presses “add to cart” on a t-shirt, let a popup make an offer for a matching pair of jeans.
Buyers tend to opt for spending more money when presented with an offer that guarantees their win. They would rather pay more for getting the latest, bigger, more durable product, etc.
Tip: Post-purchase upsells have a higher conversion rate. Customers have already trusted you by completing the order, thus making it way easier to spend a few extra bucks and get a product they like for less.
b) Offer free shipping on specific order value
Let’s face it. There’s not a single human in the entire universe who likes paying for shipping. But, everyone does want to have their orders delivered to their doorsteps. That’s where your opportunity for increasing the AOV arises.
Give customers the chance to enjoy free shipping on orders with a specific minimum value. For example, if your average order value is $35, offer free shipping for orders that are >$60.
They get to spend more on the products they love and have the package delivered to their desired location, without paying a dime on shipping. Everyone’s happy.
Tip: Take a look at your margin profits and decide what’s the most meaningful “minimum order value” for your brand and buyers. Be careful not to set up a very high “mov” that scares customers away.
c) Create bundles of frequently-bought-together products
The third option on the menu to boost AOV is to identify the products that are frequently bought together and bundle them together.
To be effective, bundles should make sense for customers to purchase. If they don’t save money on buying all these products together, why bother in the first place?
Put a sweat discount on them and watch your visitors click that “shop” button over and over again.
Tip: Make bundles time-sensitive. FOMO is a huge motivator, so better capitalize on it.
4. Treat High-Value Customers Like Royalty
Last but certainly not least, to have a sustainable business and keep increasing your Customer Lifetime Value in the long run, you can’t treat your high-value customers like mere buyers.
These are the people that have the most impact on your business, always returning to buy more.
Create a loyalty program where you reward customers by offering discounts, free shipping, exclusive drops, or even letting them have an opinion about the launch of a new product.
Building strong relationships with this segment of your buyers can make or break your business.
Tip: Be more personal when addressing these buyers. They’re basically your fans, so drop the formalities and speak from the heart.
Let us help you boost your Customer Lifetime Value
Running an eCommerce business is almost a 24/7 job. And that can get pretty overwhelming. Instead of going solo dolo on building your brand, let us take some weight off your shoulders. Book a free call and let’s chat about how we can add value to your business.