Getting the most out of a customer is every merchant's dream since man invented commerce. In this piece of article, I am going to look into practical ways and tactics retailers often use to increase customer lifetime value.
But before diving deeper, allow me to define what is Customer Lifetime Value or CLV?
Customer Lifetime Value(CLV) according to wikipedia is the net profit attributed to the entire future relationship with a customer. Simply put, it determines how loyal your customers are to your product/company that they keep on coming back to purchase from you. Those purchases aggregated for a lifetime is what we call CLV or customer lifetime value.
Why is knowing your customer lifetime value important?
Here is how PIWIK, an open-source analytics software says,
Customer lifetime value is a primary metric for understanding your customers. To be more precise, it's a prediction of the value your relationship with a customer can bring to your business. This approach helps organizations demonstrate the future value they can generate from their marketing initiatives.
Customer lifetime value puts more premium on customer retention rather than going after new customers!
Simple way to measure CLV
If a customer bought a $50 shoes from the same store for the last 10 years, his CLV has been worth $500 to them. Of course we are not factoring in the cost for acquiring and maintaining that customer. That's another topic worth exploring.
Check the rest of the article 11 Most Important Key Metrics To Track In Your Ecommerce Sales Report to know more about the topics of ecommerce analytics. If you want to know more about how you can take advantage of ecommerce analytics, send us an email using the contact us page.
Here are practical ways in order to increase Your Customer Lifetime Value:
#1. Profile Your Customers
Conduct surveys of your customers to learn about the buyer personas that your business interacts with most. You may want to offer incentives to show customers your appreciation and to get more information.
Customer analytics can help your business identify and exploit trends among clients. Your business can use this information to refine its marketing efforts, products and services to better appeal to existing customers.
#2. Personalize you customer Service
Service personalization has become the norm in many industries. Finding effective ways to tailor your services to the needs of individual clients or buyer personas is immense in today's commerce.
At shoptech media, what we usually do is to limit the number of clients we take in. Precisely because we want to know and serve our clients well. We have to accept the fact that, in any business process and model, it would be impossible to take all kinds of clients in without sacrificing quality of customer service. More importantly, we also understand that each one of our client can bring greater profit and has a better chance of becoming a repeat customer. At a minimum, we create special offers tailored only to our clients’ past transactions and current needs.
#3. Stay connected and interact with your customers
Keep your customers abreast of news and any special offers you might have. Let them know you are concerned about them using your product. Social media has opened a huge platform in order for this to happen. Remember that you are competing against the entire Internet for a share of their attention, so make sure your online presence is compelling and engaging.
By interacting with your customers, whether it is by sharing their pictures and reviews or by immediately responding to their complaints, you can show that your business values and appreciates them.
#4. Reward your customer's loyalty
One simple, yet effective way to keep customers returning to your business is to reward loyalty. You can provide discounts, freebies or group deals depending on customer spend.
Did you know that a 5% increase in customer retention can translate into a 25% or greater increase in profits? This has been proven accurately according to smallbiztrends' 2014 article.
You can’t overestimate the importance of customer retention. Loyal customers are likely to buy more often from you and spend more money on each purchase. Plus, keeping customers costs less than continually acquiring new ones.
You can basically double your customer lifetime value with loyalty programs according to this article, Double Your Sales with Customer Loyalty Programs.
- Increase average order value by cross and up-selling
Build the average value of your orders by suggesting other suitable items when a customer buys a product.
The idea is to get them to add another item to their order. The image above is a cross-selling method done before the checkout page. Cross and up-selling makes their transaction more profitable for you.
- Personalise your email marketing strategy
In fact 72% of ecommerce customers now openly declare that they are willing to share their personal information to a certain degree in return for personalized content.
Ecommerce personalization simply saves ecommerce customers time looking for products they have been interested in, and contributes around 10% to online revenue for ecommerce businesses. So, it’s a win-win situation for both parties.
We wrote a piece about this previously. Read full article, 5 Reasons Personalized Email Marketing Is Important To eCcommerce.
- Add Value to the life of your customers
Customers are looking for brands who make their lives better and easier. Products that not only are useful, but add value to what they do.
Offer them reminders, gift wrap, and other added extras. This means they don’t get distracted by the need to buy from other websites and rely on your brand to help them out.
Consider this:
repeat customers are responsible for almost half of the total revenue of an ecommerce store.
- Go above and beyond what your customers expect
Invest in a long-term relationship by going the extra mile and making sure they remember your brand. Surprise them with a free gift, sample, or upgrade.
Don’t just provide customers with what they expect. Go above and beyond in unexpected ways.
- Incentivise free delivery
People in general, don’t like to pay for delivery. I myself don't, if it is possible. Your customers will probably purchase additional items if a free delivery is available. Fact!
Offer free delivery at an amount just above what the typical customer spends. This helps
In conclusion
The tactics we’ve explored are designed to encourage the average customer to return frequently, and spend more of their money with you.
Focusing on increasing customer lifetime value allows you to design an efficient strategy with more concise budget planning. Remember, your CLV is the most powerful indication of the health of your business.
Let's us know what you think about this practical ways to increase customer lifetime value. Do you agree with the author or not? Are their points you deemed important that we might have missed? Use the comment section to give your valuable thoughts.
