Increasing Customer Lifetime Value

Acquiring new customers online costs money, which can be really expensive if you don’t know what you are doing. Not only does a third of the overall money spent online come from returning customers, but they spend nearly three times more than one-time shoppers as well. Plus, it’s much cheaper to bring back an existing customer than to acquire a new one. This is super important when creating an eCommerce strategy for the long term. 

Most marketers only focus on cost per acquisition (CPA) as a critical key performance indicator of their campaigns. As important as this metric can be, it is often short term in its vision. Few companies could give a detailed report on the total lifetime value of a customer quarterly, annually and beyond. 

Let’s say it costs $10 to acquire a customer who spends $15 upon their initial purchase. This would give one perspective on how the ad spend is being utilized, but not the entire picture. That customer could only purchase once over their entire relationship with that brand or purchase once a month for an entire year. That initial $10 to acquire that customer remains the same, but that same ad spend generates $15 in scenario number one and $180 in scenario number two; a 1200% difference in customer lifetime value.

This example does not even take into consideration the number of referral purchases that the customer creates. Acquiring that single loyal customer could generate 10 new customers at $0 CPA if that customer loves the product and is incentivized to share that brand with their friends.

So that initial CPA investment is only a small fraction of the story.

First off, what is most important is making sure that the product being sold is high quality and something that customers actually get value out of using. If the product is poor, then it is unlikely that the customer will return or tell their friends about it. Remember, as humans, we enjoy telling our social group about products, brands, movies, shows, restaurants, books that bring us value.

If there is already an amazing product in place, then the question is “How do I increase the lifetime customer value of each customer I currently have and each new customer that I will acquire?”

If the right systems are in place to keep your brand at the forefront of the customer’s mind at key steps during the buyer’s journey, then you are creating the opportunity to create a deeper relationship resulting in brand loyalty and customer advocacy over time.

So now that the importance of customer lifetime value established, what are some specific systems to start building deeper relationships with your customers?

Personal Email & SMS Flows

One of the most effective trends in eCommerce in 2020 and beyond is personalized email flows, with a recent explosion in SMS marketing. Klaviyo is the leader in email marketing for eCommerce brands and they recently announced SMS messaging. Creating specific automated email flows for the entire customer journey allows you to control what content the customer sees and when they see it.

For example, after a customer makes a purchase, they could trigger an email flow with three follow up emails over the course of 14 days. Let’s be more specific. You can even create specific email flows for customers who purchase specific collections or products. You could also have a specific email flow for customers who spend $100 or more versus customers who spend less than $100. Either way, you can tailor their purchase behavior to determine what emails they receive.

Post-purchase is just a single email flow triggered by a purchase. There can be an email flow to welcome some who signs up to your email list. Another email flow can be centered around gaining on-site reviews from customers who have purchased two-plus times. These customers are more likely to give a positive review. Or maybe an email flow to offer a discounted subscription program to customers who have spent over $500 over their lifetime with your brand.

The possibilities are endless with automated email flows. What is most important is making sure that the emails are as personable as possible, using conditional logic to filter who receives specific emails. When your customers receive emails is just as important as what is on the email. All of these variables go into consideration when designing these email flows, but the results are a deeper relationship between the brand and the customer.

The more personal and intimate the emails are to the customer, the more likely they are to reengage with the brand and the less likely they are to unsubscribe and be annoyed from generic emails. Also, the more trust that is established, the more likely the customer will stay loyal to the brand and not a competitor.

Subscribe & Save

Increasing the lifetime value of a customer also requires increasing the frequency of purchase. Reducing the friction to allow customers to subscribe to a specific product or bundle not only creates more recurring revenue for the brand but allows the customer to never run out of your product. And stated earlier, if the product is high-quality and adds value to the customer’s life, then making sure they never run out of the product is a step in the right direction to deepen brand loyalty.

With tools like ReCharge, creating a subscribe and save or subscription-only bundle has never been easier. First-time customers might not be as interested in subscribing to a product they haven’t even tried, but returning customers already show a trend of repurchasing. This presents a great opportunity to offer them a subscription offer that has a discounted price.

One of the best features of ReCharge is the customer-facing portal. This gives the customer a detailed version of what they are subscribed to when the order is scheduled, the ability to opt-out or change the date, and also change the payment option.

Having an easy customer portal for your subscription customers is just another point to build a deeper relationship with those loyal customers. If the process is easy to use and transparent, the more likely they are to continue to stay subscribed.

These customers who opt-in are some of the most loyal customers you have. The great news is that ReCharge and Klaviyo integrate together, so you can nurture these customers easily by creating a specific email flow for customers who subscribe to your products, thus creating a deeper and more personal relationship between your brand and the customer. I do admit that this model is not always the best option, but it’s not to difficult to set up a small funnel and start testing to see if your customers are interested in subscriptions.

Loyalty Program & Brand Advocacy

Turning returning customers into brand advocates is one of the biggest steps to creating lifelong loyalty. Creating a loyalty program that is properly incentivized is a sure way to get customers to not only make more frequent purchases but also refer new customers to your brand. The goal is not to only increase the lifetime value of each customer, but to turn each one of them into a marketer for your brand.

Remember what was mentioned at the beginning. We enjoy telling friends and family about the products and brands that we support and align with. To properly facilitate this, incentivize your customers to share your products on their social media using tools like Swell by Yotpo.

Having an engaging loyalty program that incentivizes social sharing and leaving reviews on products not only helps spread awareness about your brand but also increase the trust for new visitors that find your brand. This decreases the cost per acquisition indirectly and also increases the conversion rate on your eCommerce store by establishing social proof and trust from previous customers.

Not all loyalty programs are equal and what you incentivize for are brand specific and mission-critical. If you are looking to increase the total amount a customer spends or the number of times they purchase, lean towards building out a VIP tiered program that is based on spending behavior. On the other hand, if you want customers to share your brand on social, write reviews or refer friends focus offering discounts or a small gift in exchange for those specific actions.

Final Thoughts

Increasing the lifetime value of each customer is a long term strategy that starts with establishing the right systems now. One shift in the perception of growing your sales online is around nurturing versus acquiring. As important as it is to grow your customer base, don’t neglect the current customers you have and make sure that you have systems in place to keep your new customers engaged. The key is to stay engaged with your customers from start to finish along the entire customer journey in a personal way that rewards them for purchasing, leaving reviews and sharing your brand with their social media community.