8 ways to increase your customer lifetime value

Article topics

1. What is customer lifetime value?
2. How to calculate customer lifetime value
3. Is there a benchmark for customer lifetime value?
4. The 8 tips
5. Grow your CLV with Xigen

Do you know how your eCommerce store is performing?

Monitoring the right metrics can help you identify what your store is doing well and where there’s room for improvement.

If you want to monitor the state of your customer relationships, customer lifetime value is a must.

In this article, we’ll explain what customer lifetime value is, how to measure it, and what you can do to get your CLV as high as possible!

Want to check out some other metrics that can help you identify how your eCommerce store is doing? This article explains everything you need to know!

What is customer lifetime value?

Customer lifetime value measures how much money a customer spends in your store during your business relationship.

You may hear it referred to as CLV, LTV, or CLTV.

It’s easier and far more profitable to nurture existing customers than trying to find new ones. In fact, existing customers spend nearly a third more than new ones.

A high CLV shows how profitable you are, how good the customer experience is, and how your business can grow in the future.

How to calculate customer lifetime value

CLV is one of the harder metrics to determine, with only 42% of businesses confident they can measure it correctly. However, it’s worth investing time into working it out!

To calculate customer lifetime value, you need to know three things:

• Your average order value (the average total spent when a customer places an order on your website)
• The purchase frequency rate (the average amount of times a customer places an order in a specific time frame. We recommend a year.)
• The average customer lifetime (the amount of time between a customer’s first purchase and their very last purchase. We recommend measuring this in years.)

You then multiply these together to get your CLV.

Let’s say the average customer:

• Spends £60 on every order
• Places an order four times a year
• Has a relationship with you lasting ten years

60 x 4 x 10 = this means your customer lifetime value is £2,400.

Is there a benchmark for customer lifetime value?

While there are average CLVs for different industries available online, we don’t recommend using them. This is because the customer lifetime value for your eCommerce store will vary depending on what you sell and how much you sell for.

The best company to benchmark against is yourself. Regularly monitor your CLV, and you’re in a great position to take action if it suddenly drops.

Customer lifetime value works well when it’s partnered with customer acquisition cost, or CAC. This is how much money you spend bringing a new customer to your website. So, by using both, you can see how much your customers are spending versus how much you invested in getting them on board.

Ideally your CLV should be three times more than your CAC.

So now that we’ve looked at what CLV is and how to calculate it, what can you do to keep this metric nice and high?

We spoke to our eCommerce experts and asked them their top tips for increasing customer lifetime value.

The 8 tips

1. Consider upsells and cross-sells

A cross-sell is when you try to sell a related item to a customer, while an upsell is when you encourage them to buy a slightly more expensive item instead.

When done right, upselling and cross-selling can make your visitors feel like they’ve got their very own personal shopper, recommending products they might not have thought of. As a result, they have a better shopping experience, spend more money, and increase your CLV.

Upselling can boost your revenue by up to 43%.

However, if you offer upsells and cross-sells, you must offer them with your customer’s best interests at heart.

Shoppers can quickly spot when you’re trying to trick them into a purchase or sell them products they don’t want, which can lead to a loss of sales. It’s essential to use your customer data to identify the right items to promote.

Personalisation is vital to keep customers happy and increase customer lifetime value on your eCommerce store. Here are some additional ways to use personalisation on your site to increase sales.

2. Go the extra mile with customer service

Providing an exceptional customer experience is one of the best things you can do to increase CLV.

Customers will continue to shop with brands that offer excellent customer service and move away from brands that neglect their needs. Nearly three out of four shoppers say they will switch to a competitor if they have multiple bad experiences with a business.

What is the definition of good customer experience? It depends on your industry, what you sell, and who your target audience is.

Some customers want to be able to contact a business 24 hours a day across multiple social media channels. Other customers are happy if they get a response to an email within the space of a working day.

It is vital to understand your customers, what they want, and how you can exceed their expectations. This doesn’t have to be expensive or time-consuming – even a handwritten note with an order can make a big impact!

3. Introduce a loyalty programme

A loyalty programme encourages customers to keep shopping with you by offering discounts and perks.

It’s estimated that the average American belongs to nearly 17 customer loyalty programmes, so they do work as a way of keeping customers engaged!

Customer loyalty programmes can be free or paid for. A great example of a paid for loyalty programme is Boohoo Premier, which offers free next-day delivery, free returns, and exclusive discounts in exchange for an annual fee.

According to McKinsey, members of paid loyalty programmes are 60% more likely to spend more, while members of free programmes are 30% more likely to spend more.

4. Focus on your website speed and responsiveness

While it’s important to focus on the experience you give your customers, you also need to consider the technical aspects of your website. A fast-loading, mobile-responsive eCommerce store will do a lot to encourage your customers to buy more products.

According to Portent, a B2C site that loads in one second has a 2.5 times higher conversion rate than one that loads in five seconds.

The best way to see results is to improve your page load speed. Optimising images, removing unnecessary extensions and applications, and reviewing your page code can make a significant difference.

If you sell internationally, a content delivery network (CDN) can ensure your website loads as fast as possible in different countries.

5. Treat your most loyal customers like VIPs

It’s likely that you’ll have a cohort of customers who place regular orders with you. It’s vital to treat these shoppers well and show that you value their custom.

The best way to do this? By treating them like VIPs. By showing you appreciate these customers, they’re not only likely to spend more, but sing the praises of your brand to friends and family.

25% of your customers account for 66% of your revenue, so it’s always worthwhile to give these shoppers a little extra.

Here are some of the ways you can offer VIP service to selected customers:

• Give them early access to sales and promotions
• Provide exclusive discounts or benefits
• Give them free samples or gifts on their birthday
• Send them personalised emails, giving them an exclusive look behind the scenes of your brand

6. Listen to your customers

If you want to boost your customer lifetime value, it’s essential to listen to the people who are buying from you.

Don’t be afraid to ask for feedback, whether by email, push notification, live chat, or on your web pages. Not only does this give you valuable insights into how you can improve the customer experience (more on that later), but customers appreciate when you ask their opinion.

This can help build strong relationships, which means customers are more likely to buy from your business.

7. Consider your shipping and returns options

If you want to keep customers happy, free shipping and free returns can be a great way to do this. 72% of shoppers say they’d only buy from sites offering free returns, while 56% of UK shoppers expect free shipping as standard.

However, there is a trade-off you need to consider. Free shipping and returns don’t just eat into your profits but can also be an unsustainable option. It’s estimated that one out of every four returns can’t be resold, meaning they end up in landfill.

It’s essential to look at your profits, think about your values, and speak to your customers to see what would drive them to be more loyal to your business.

8. Use remarketing campaigns

You often need to give loyal customers a gentle nudge to encourage them to make another purchase on your website. Remarketing campaigns are an affordable and effective way of reminding shoppers that you’re still around.

Remarketing is when you re-engage existing customers through your own marketing channels, often through an email, text message, or a push notification on their mobile phone.

For example, a cart abandonment email would count as remarketing. This is because you’re encouraging a customer who’s already engaged with your website to come back and complete their purchase.

Grow your CLV with Xigen

The key to boosting customer lifetime value is to provide an exceptional customer and user experience. Keep your shoppers satisfied, and they’ll reward you with their loyalty in the months and years to come!

As the eCommerce experts, we can help you increase your CLV. From stunning email marketing campaigns that shoppers will love, to ensuring your website loads quickly and looks good on mobile – we’ve got you covered.

Contact us today, and let us put you on the fast track to happier shoppers and boosted customer lifetime value.

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