Being in eCommerce means you need to focus on more than just the short-term goal of Conversion Rate Optimisation. Instead, it’s essential to look at the big picture — zeroing in on Customer Value Optimisation, which considers multiple metrics, including Customer Lifetime Value (CLV).
But with all the acronyms thrown around, keeping track can be challenging. So what is CLV, and why is it important? That’s what this blog is all about.
What is Customer Lifetime Value & How to Calculate it
Customer Lifetime Value (CLV) predicts the net profit attributed to a customer's future relationship. In layman’s terms, it's an estimate of how much money a customer will spend on your products or services over the course of their lifetime - the value that they bring to your Shopify store.
Here is the formula for calculating Customer Lifetime Value:
If your average sale price is £50, the number of sales per year is 2, and the customer lifespan (average retention plan) is five years, then that customer is worth £500 to your business.
That being said, CLV is only a prediction; it’s not concrete. Many factors can influence a customer’s spending habits, including changes in their personal or professional life, new competitors in your industry, or a shift in industry trends.
But when you understand where your CLV stands, you can make informed decisions on how to allocate your resources, such as marketing and customer service, to maximise the value of your customer base.
One of the most significant benefits of improving CLV is that it can lead to increased profitability. If all other variables remain the same, but you're getting more value out of each customer to your store, your profitability will be increasing. By focusing on retaining customers and acquiring new ones with a high potential CLV, you can improve the overall lifetime value of your customers.
Top 7 Strategies to Improve Customer Lifetime Value
Now that you know why CLV is so essential and how to calculate it, it’s time to strategise and create definitive plans of action to improve your CLV — no matter how high it already is.
Loyalty Programs:
Introducing a loyalty program like with LoyaltyLion or Yotpo will increase the chances of customers returning. All excellent loyalty programs have tiers which drive customers to push their way to the top and get more rewards. And who doesn’t love free stuff?
On-Site Quiz
An on-site quiz with a tool like Octane AI will not only give your customers an easy and fun way to find what they need, but it will also provide you with critical zero-party data — allowing you to target customers individually with tailored product recommendations and messaging.
Subscription-Based Products
Adding a subscription option to your products is a great way to ensure repeat revenue. While this strategy will not suit every brand, if you have products that are used frequently and need to be replaced, it makes recurring revenue a given and eases the life of your customers.
Personalisation:
We cannot highlight the importance of personalisation enough. It’s key in today’s digital age. Using data and insights to create personalised emails, product recommendations, and special offers, you can make customers feel as valued as they are, increasing the likelihood of them returning.
Upselling and Cross-Selling:
By offering a better version or complementary item compared to the product the customer is about to purchase, you’ll increase your average order value and boost your Customer Lifetime Value. Using integrations like Rebuy, which not only allows you to set 'rules' around the products to be shown (or the data sets), but also offers powerful AI product recommendations based on user behaviour. You can also extend these personalised product recommendations into your email marketing, as well as onsite, including on your product pages, in the cart, and even on the order confirmation page.
Win Back Lost Customers:
Sometimes customers fall out of love with your brand. Or they’ve had massive life changes. Don’t be afraid to reach out and try to win them back. Requesting that they do surveys so you can know more about what impacts their decisions around your brand is an excellent way to find pain points. And who knows? Maybe they’ll give you a second chance.
Customer Segmentation:
You can use customer segmentation to identify high-value customers and create targeted marketing campaigns to attract and retain them. Qualitative research tasks, like surveys, will help you gain valuable customer feedback to identify areas of improvement so you can create actionable insights.
Maximise Your Shopify Store's Success with Customer Lifetime Value (CLV)
In eCommerce, it’s essential to focus beyond short-term gains like Conversion Rate Optimisation (CRO) and consider long-term success metrics like Customer Lifetime Value (CLV). By calculating CLV, you can predict the total value a customer will bring to your store, helping you make strategic decisions on marketing, retention, and customer acquisition. CLV is a crucial metric for eCommerce success, and several strategies can be implemented to improve it, over and above what we’ve mentioned here. By retaining existing customers, you can improve the overall lifetime value of your customers and increase your profitability.
In this blog, we’ve broken down 7 proven strategies to increase CLV, from loyalty programs and on-site quizzes to personalisation, subscription products, and customer segmentation. Each of these strategies enables your Shopify brand to build deeper, more profitable relationships with your customers. Remember that CLV is simply a prediction; as such, it’s important to track and monitor the metric over time and make adjustments to your strategies as needed.
By improving CLV, you're not only boosting immediate revenue but also driving long-term growth and profitability. That’s why, at Blend Commerce, we don’t stop at CRO. Our CRO Plus Program integrates advanced Customer Value Optimization (CVO) techniques to ensure your business thrives through increased CLV.
Ready to maximise your customer value and boost your Shopify store's profitability? Learn more about our CRO Plus program here or get in touch with us at Blend today, and discover how we can help you achieve sustainable growth.
Published: January 30, 2023
Last updated: October 18, 2024
