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How to increase customer lifetime value

Jessica Farelly
By Jessica Farrelly

Customer lifetime value (CLV) – how much a customer spends with your brand for as long as they’re a customer – is an important KPI for ecommerce stores to keep track of. Why? Because it’s an easy way to gauge whether or not to focus your time and budget on nurturing existing customers, or acquiring new customers (or both).

When it comes to growing your revenue, you essentially have two options: either attract new customers, or increase existing customers’ CLV. The former is a more expensive option since it involves more advertising and convincing prospects of your benefits. The latter is arguably the easier method since existing or past customers already know (and presumably like) your brand.

So, the $64,000 question is, “How do you increase customer lifetime value?”

Loyalty programs are key to customer lifetime value

With loyalty comes repeat customers, so starting a loyalty program is great way to increase customer lifetime value. The perks of the program can be free shipping for members, exclusive discounts, free gifts with a purchase, or early access to sales, to name just a few. 

By offering clear and compelling incentives to join your loyalty program, you can acquire valuable customer data and contact details. Then, it’s simply a case of targeting these shoppers with clever marketing to bring them back to your site again and again. The possibilities and perks of a loyalty program are endless, since you can create whatever model works best for your business.

Product bundles and subscriptions boost AOV

Product bundles and subscriptions appeal to customers because of the associated savings on items they would normally order individually. These tactics are also a smart way to introduce customers to new products they hadn’t planned on trying previously. (Of course, this also means the customer will spend more.) 

Cosmetics, beauty, and healthcare companies tend to do this really well. For example, if you sell shampoo, it’s a good idea to cross-sell the matching conditioner as a bundle, since customers often buy both together. Go one step further and allow shoppers to sign up for recurring deliveries of their favorite products in exchange for a slightly deeper discount, and watch your customer lifetime value soar.

Not in the beauty business? No problem. Subscriptions are becoming more and more common across multiple retail verticals. Check out these case studies on Fabletics and Dia&Co for a masterclass in perfecting the fashion subscription model. 

Shoppers love free shipping

Nothing is more enticing to an online shopper than free shipping. And with a minimum order requirement to receive free shipping, this tactic all but guarantees customers will top-up their carts to get that free shipping offer.

One way to push this, in addition to having a banner on your homepage, is to let customers know at the checkout page that if they spend $X more they’ll receive free shipping with their order. By reviewing your average order value (AOV) history, you can easily determine what the minimum spend should be in order to boost those sales.

Follow up free shipping with quick delivery timelines and easy returns, and you’ve got yourself a repeat customer. 

Insights to shape your ecommerce strategy in 2021

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Features vs benefits: know the difference

Listing both features and benefits can often help sell a product that has been sitting on a customer’s “nice-to-have” list for a while. Features are the black-and-white characteristics of a product, such as their attributes and physical details. Benefits, on the other hand, are the positive implications for the customer if they purchase the product.

For example, if you’re in the market for a computer but not sure if you want a laptop or a desktop, both features and benefits will be important to help you make that decision. Beyond details like weight and dimensions, it’s important to know why you should choose one option over the other. 

Tailoring product descriptions and messaging in this way can give shoppers the nudge they need to purchase a product they were previously unsure about. Undecided shoppers are the enemy of a healthy customer lifetime value. Make it as easy as possible for your customers to convert.

Personalization brings shopper back for more

When it comes to ecommerce, the future is in personalization. Customers appreciate being shown products that are relevant to them and their shopping habits. Individualized shopping experiences make customers like and trust a brand more, which ultimately makes them more loyal. 

With the right solution, you can recommend products to customers based on their viewing patterns and order history. Personalized recommendations can help increase customer lifetime value since you can recommend items that complement previous purchases, for example. What better way to encourage customers to return to your site and make additional purchases, than to tailor their recommendations based on the products you already know they love?   

Increase customer lifetime value to fuel revenue growth

Building that familiarity, likeability, and trust with your customers ensures they keep coming back to your store, again and again. The trick is to create a shopping experience that customers love and find value in – the benefits to your business will naturally follow.