Oftentimes, the world of eCommerce feels like a never-ending pursuit for new customers, doesn’t it?
And so we launch new products.
We roll out fresh campaigns on a regular basis.
Oh, and we meticulously test and optimize those campaigns for the best ROI possible.
But what if the key to growing your bottom line wasn’t rooted in “the next big thing” at all?
What if, instead of chasing more customers, you created more valuable customers?
Think about it, for a moment. If you have a lead that’s made that ever-so-important initial purchase, you’ve already done the hard part, right?
Here’s some food for thought: it costs seven times as much to acquire a new customer than it is to retain an existing one.
Rather than scramble for sales from strangers, e-tailers should consider how they can squeeze more of their current base of customers.
That’s why understanding your customer lifetime value (LTV) is such a make-or-break metric for merchants today.
What is Customer Lifetime Value (and Why Does It Matter?)
The concept of your customer lifetime value isn’t rocket science but it is often overlooked.
Simply put, LTV represents the average of how much any given customer is worth over the course of their time in your funnel.
There is no “right” way to calculate LTV, but this infographic from KISSmetrics represents an in-depth look at how massive brands like Starbucks break down just how much their average customer is worth.
A kitchen table formula for calculating your LTV that you could glean from your on-site metrics would be as follows:
Average $ of Sale x Number of Repeat Transactions Annually x Average Customer Lifespan = LTV
Lifetime value isn’t exactly the most talked-about metric, but understanding it is key for scaling and staying competitive in a cutthroat eCommerce landscape.
As noted, customer acquisition is expensive. Working to raise your LTV relieves the pressure of constantly having to fight for new business and rewards you for the work you’ve already done acquiring customers.
Likewise, you have a better idea of your budget and monetary needs as a business. Rather than worrying about launching a new campaign or scaling too quickly, having a constant pulse on what your customers are worth leaves fewer question marks around what you can spend.
9 Strategies You Can Use to Increase Customer LTV
Without digging through your data, there’s a much simpler concept at work here.
That is, e-tailers should strive to boost the buying power of each and every one of their customers.
The solution to more valuable customers isn’t as simple as raising prices, though.
Increasing your customer LTV requires e-tailers to be both tactful and tactical. Otherwise, you run the risk of driving your long-term customers away.
That’s why I’ve outlined nine proven tactics that not only help you increase your customer LTV but some of which also do double-duty of helping you acquire new customers
And with that, let’s dive right in.
1. Consistent Customer Communication
After your customers make their first purchase, there’s a 32% chance that they’ll buy from you again.
Those second, third and fourth purchases don’t happen by accident, though.
The responsibility to remind them to do via email so falls on your shoulders, especially with so much competition in the e-commerce space.
Through company newsletters, new product announcements, and breaking news, e-tailers can provide previous buyers with a small push to return without bugging them.
And while staying in touch with your customers might seem like a no-brainer, merchants have to be mindful of what that communication looks like.
For example, the jury is still out on exactly how often merchants should email their lists. Anywhere ranging from monthly to weekly is fair game depending on your industry, yet you don’t want to run the risk of being labeled as a spammer in the process.
That’s why encouraging buyers to become social followers is so important. You effectively build rapport with customers on a consistent basis minus spamming them.
2. Introduce a Subscription Service
E-tailers following the subscription model have grown 200% annually since 2011, signaling the staying power of subscriptions.
Rather than relying on one-offs, subscription services essentially generate guaranteed repeat business time and time again.
Subscription-based e-tailers know exactly what their customers are worth month-over-month and therefore have to worry less about acquisition. Instead of wondering when those second, third and fourth purchases are going to come, they’re basically “paid forward.”
Popular subscription services like Loot Crate reward their subscribers with lower price points and freebies for long-term commitments. Such a discount is most certainly worthwhile for the brand who transform a would-be one-off into a year’s worth of sales.
Birchbox eases the mind of new subscribers with a “cancel at any time” notice, coupled with a free gift for signing up.
Keep in mind that you don’t necessarily need to offer up a subscription box to take advantage of the subscription model.
For example, check out how Quantum Squares offers a subscription discount for an individual product.
3. Provide Personalized Product Recommendations
Personalization is one of the top priorities of e-commerce merchants in 2018 and for good reason.
Given that 75% of buyers are more likely to purchase from a merchant that recommends products or knows their purchasing history, the need to treat customers as individuals can’t be overstated
Some customers flat out need help making decisions, others simply need that extra push to make a purchase. Regardless, brands that provide that sort of helping hand are making life easier for their customers and in turn encouraging repeat business.
Amazon is arguably the most widespread example of pushing personalized recommendations, with just about every other e-tailer following suit.
However, e-tailers can also recommend products prior to their customers’ next purchase as. Check out how Seventh Ink does so by categorizing their products and offering similar recommendations based on specific parameters.
Such recommendations boost sales by highlighting potential purchases that might otherwise go unnoticed by shoppers.
You can also make personalized product recommendations using cross-sell and up-sell features (which LemonStand happens to have built in!)
Similarly, MailChimp offers a personalization integration as part of their email marketing platform.
4. Exclusive Offers for Former and Current Customers
In a day and age where your customers are sifting through over 100 emails per day, anything you can do to make yours stand out is a major plus.
Exclusivity is one of the oldest and powerful marketing triggers in the book, and definitely, something e-tailers should consider when crafting their email campaigns.
Offers that treat your customers like members of an exclusive club, receiving “for your eyes only” deals can do exactly that.
As part of segmenting your email list, coming up with campaigns for consistent, multi-time buyers serves as a subtle yet significant way to build a sense of brand loyalty.
Whether it’s a loyalty coupon, flash sale or early access to an event, don’t neglect the need to encourage your repeat customers to remain repeat customers.
5. Effective Marketing Automation
Ideally, merchants should put pieces of increasing their LTV on autopilot.
After all, the whole point of doing so is to spend less time chasing down individual sales, right?
Effective marketing automotive can help fill in the gaps and help you win otherwise lost sales from customers.
Take email autoresponders for example. Considering that three-quarters of online retailers suffer from the epidemic of cart abandonment, having autoresponders set up to win back those lost leads is a must.
Rather than worry about “what-if” and whether or not someone converted, your email platform does the legwork for you. This cart abandonment message from Huckberry offering free shipping to a customer that hadn’t completed their order is a shining example of smart automation in action.
Similarly, you can segment your list based on how often customers have interacted with your messages or store within a certain frame of time (think: months or up to a year).
Sending “we miss you” messages to former customers creates a baseline of return business since 45% of recipients read reactivation emails like this one from Teespring.
6. Rewards and Loyalty Programs
A tried-and-tested custom retention strategy, rolling out a rewards program helps gamify the shopping experience and keeps customers coming back for more. Here’s an example from Walgreens:
Don’t assume that loyalty programs have a high barrier to entry, either. In fact, 77% of consumers participate in some sort of retail loyalty program already.
The beauty of loyalty programs is that they can be used across all industries, too. As evidenced by PrintCloud’s rewards program, it’s not just fashion and apparel brands that succeed with such programs.
And much like product recommendations, tons of third-party loyalty platforms like Referral Candy exist so you can roll out your own rewards on-site.
7. Upselling and Cross-Selling
The most straightforward way to increase your average order value?
Upselling, not increasing your price point.
Presenting your customers with an upsell at checkout is a cornerstone of commerce itself, granted you’re tasteful about it.
The right offer that’s not presented as totally in-your-face has the potential to entice your customers to spend more. The key is positioning and framing your upsell offer as a sort of bonus that’s worth the extra cash. Ahrefs illustrate positioning well using tiered pricing:
And on a related note, cross-selling by offering a product related to what’s being purchased is likewise common practice.
For example, “Shop This Look” pages like those presented by J. Crew highlight individual pieces of an outfit to buy while browsing. Much like product recommendations, cross-selling provides buyers with more options without being pushy.
8. Tactical Freebies and Discounts
It’s still hard to resist the power of freebies in 2018.
The same rings true with steep discounts, too.
Although giving something away might seem backward for e-tailers trying to boost their bottom lines, consider how discounts represent a gateway to larger purchases.
For example, 90% consumers note that free shipping their number one incentive to shop online more. As long as your pricing structure makes sense, purchases which push free shipping or steep discounts will still result in a net positive.
That’s why brands like H&M can get away with perpetually running deals coupled with free shipping: the repeat business is worthwhile in the long-run.
9. Customer-Centric Marketing
The final piece of increasing your LTV is making a personal connection with your buyers.
Once again, customers desire to be treated like individuals. Arguably one of the best ways to show your customers some love is by including them as part of your marketing.
Through user-generated content such as customer photos and testimonials, you not only show off your products in action but also show that you’re paying attention to those who purchase from you.
In turn, you are able to generate more authentic marketing and create more brand advocates through user-generated content. That’s why hashtags and social media remain so valuable for e-tailers since it puts brands and customers on the same level.
Oh, and keep in mind that encouraging customers to submit photos and testimonials is probably easier than you think. Approximately 50% of consumers actually want brands to tell them which types of UGC to create, but only 16% of brands actually do.
What Are You Doing to Boost Your LTV?
Never underestimate the power of the customers you already have.
Increasing your customer LTV should be a measurable, long-term goal for any given e-tailer. Not only does this boost your bottom line over time, but also ensures that you’re getting a higher ROI of your marketing campaigns.
You’ve already gone through the legwork of converting leads and scoring sales: these tactics are low-hanging fruit in the grand scheme of things.
The sooner you start focusing on LTV, the sooner you can maximize profits from your ecommerce empire and keep your customers happy.
At the end of the day, it’s a win-win.