Strategies to Boost Customer Lifetime Value in eCommerce

In the competitive world of eCommerce, business success is not only about acquiring new customers but also about keeping your existing ones. One of the most effective ways to fuel businesses seeking sustainable growth and profitability is by increasing customer lifetime value (CLV). For eCommerce brands targeting long-term success, optimising CLV is essential.

In this article, we'll break down what customer lifetime value means, how to calculate it, and actionable strategies to boost customer lifetime value in eCommerce that can drive long-term success.

What is Customer Lifetime Value?

Customer Lifetime Value (CLV) is a metric that’s used to measure how much total revenue a single customer generate for the business over their lifetime (between their first and final purchase). CLV is also referred as LTV, or CLTV. CLV is an important metric to track because it helps businesses gain insights most profitable customers, which helps to tailor marketing strategies and resource allocation more effectively. CLV is particularly useful for segmenting customers. In eCommerce, high CLV means customers are not only purchasing more frequently but are also returning for future purchases, showcasing loyalty to the brand.

How to Calculate Customer Lifetime Value

Understanding how to calculate customer lifetime value is crucial for eCommerce brands. The formula to calculate CLV is:

CLV=(Average Order Value)×(Purchase Frequency)×(Customer Lifespan)

Average Order Value (AOV): The average amount a customer spends during each purchase.
Purchase Frequency: The average number of purchase a customer makes within a specific time frame.
Customer Lifespan: The average duration a continues to purchase from your brand.

By multiplying these three factors, you can arrive at an estimation of the CLV for each customer.

For example, if an eCommerce brand’s AOV is £50, the purchase frequency ****is 2 times a year, and customer lifespan is 5 years, the customer lifetime value would be: £50×2×5=£500

Why is Customer Lifetime Value Important in eCommerce?

In eCommerce, understanding CLV is crucial because it offers several key benefits such as:

Boost Customer Loyalty: Identifies issues and helps in improving customer loyalty and retention.
Improve Customer Retention: By keeping customers engaged and satisfied, you can increase customer lifespan and increase CLV.
Cost Reduction: Increasing CLV can help reducing high customer acquisition costs.
Product and Service Improvement: CLV trends guide improvements in products and services.
Informed Marketing Decisions: Businesses can allocate marketing budgets effectively by knowing how much they can spend on customer acquisition.
Improved ROI: With a good CLV approach, the return on each acquisition effort increases significantly.

At WIRO, when we focus on increasing customer lifetime value, we're not just increasing purchase frequency but we're building a stronger brand relationship. For clients like Avery Row, we've seen tangible results in their customer retention rates and overall brand loyalty through targeted strategies.

Also, brands like UNTUCKit enhanced its customer experience with Shop Pay’s one-tap checkout, boosting customer lifetime value by 64%.

Custom Quote Block

"One-tap checkout provides an optimal experience, especially for our returning customers on the go shopping via mobile."

To effectively increase customer lifetime value, consider implementing the following strategies:

1. Personalise Customer Experiences:

A seamless, enjoyable shopping experience encourages repeated business and personalisation lies at the core of improving customer lifetime value (CLV) in eCommerce industry. It involves tailoring the customer experience by leveraging data analytics to get insights on individual preferences, behaviours, past interactions and user needs. To enhance the customer experience, consider implementing features like personalised product recommendations, a straightforward checkout process, and proactive customer support.

Oh Polly, an UK fashion brand showing personalised product recommendations.

2. Introduce a Loyalty Program:

Loyalty programmes stand as one of the proven method to boost CLV. Rewarding loyal customers with discounts, exclusive offers, or early access to sales can incentivise repeat purchases. A report says that, 80% of companies report positive ROI by launching loyalty program. Offering loyalty program motivate shoppers to make repeated purchases, refer friends and family, and remain engaged with your brand over time, thereby increasing their CLV.

3. Utilise Email Marketing for Retention:

Email marketing is an effective tool for any eCommerce business. Utilise automated email marketing campaigns, segment your email lists based on customers purchasing behaviour through tools such as Klaviyo. Send personalised emails, follow-up emails, product recommendations, and exclusive offers to your relevant customers to strengthen customer relationships and encourage repeat purchases.

4. Improve Customer Service:

Providing an exceptional level of customer service is one of the key component of promoting brand loyalty. According to Statista, 36% of respondents to a US survey said great customer service is a motivation to recommend a brand online. Start by tackling the basics, such quick responses, resolving issues efficiently and showing appreciation for your customers thus creating a loyal customer base. Customers will continue to shop with brands that offer excellent and exceptional customer service.

5. Listen to customer feedback:

If you want to boost your customer lifetime value, it’s essential to seek customer feedback from the people who are buying from you. Ask for feedback on your services and products gives you insight into what people think about your brand and its products thus keeping the relationship strong and gain valuable insights from your customer base.

6. Offer Subscription Services:

Offering subscription services for products that customers frequently purchase are one of the strongest way to boost CLV by establishing recurring revenue. This convenience encourages recurring purchases and improves customer lifetime value.

7. Implement Upsell and Cross-Sell:

Implementing Upselling and Cross-Selling throughout the customer journey is an another technique to increase AOV. A cross-sell involves selling a related item to a customer, while an upsell encourage them to purchase a slightly more expensive item instead. For example, bundling products, recommending products or suggesting complementary items at checkout. This can improve the shopping experience of customers and thus increase your CLV.

Conclusion

Optimising and enhancing Customer Lifetime Value is crucial for eCommerce business growth and requires continuous monitoring, adaptability, and a customer-centric approach. By implementing these strategies it not only drive revenue but also help in improving customer interactions, ensuring a bright future for your eCommerce brand.

When it comes to customer lifetime value optimisation, WIRO has helped numerous UK-based DTC eCommerce brands, from fashion to lifestyle, achieve outstanding results. For those looking to boost their customer lifetime value and foster loyal, long-term customer relationships, the time to act is now.