How To Increase Customer Lifetime Value

You are currently viewing How To Increase Customer Lifetime Value

Profitable Ideas To Increase Customer Lifetime Value In Your Online Store

Everyone around us is counting and analyzing, and nowadays, there are so many metrics, and it has become straightforward to get confused. This article covers one of the most crucial business measures—LTV (Lifetime Value).

What Is The Customer Lifetime Value

LTV (Lifetime Value) is the profit that your business receives from a client over the entire life cycle of working. This indicator is related to marketing efforts and working on attracting and retaining customers. You can also find alternative terms, such as CLV or CLTV (Customer Lifetime Value), which are the same things.

Will AI Replace Content Freelancers?

We recommend eCommerce merchants make sure regularly that the cost of attracting a customer does not exceed the income from the entire cycle of interaction with the customer. Otherwise, it is entirely unprofitable for your business.

How To Calculate Customer Lifetime Value

There are two most common ways of the customer lifetime value calculator:

  1. LTV = Lifetime x ARPU 

Lifetime is a metric that shows how long a person remains an active user of your product or service.

ARPU is the average profit you receive from one client for a particular period. To calculate it, you need to divide your regular income for a particular period by many customers for the same period.

  1. LTV = AOV x RPR x Lifetime

AOV (Average Order Value) is the average order value or the average check.

RPR (Repeat Purchase Rates) is the frequency of repeat purchases.

Lifetime is a metric that shows how long a person remains an active user of your product or service.

Practices To Increase Customer Lifetime Value

Even if you are mainly satisfied with how your business things are going, perfection knows no limits. Let’s take a look at practical ways to increase the LTV in your online store.

Email Marketing

This marketing method helps to grow customer retention and LTV, as a client regularly sees your brand in the inbox and remembers it. Also, the newsletter is simple enough to segment, so its effect will be even higher. By the way, if you’re searching for interesting email segmentation tactics, then you could find a bunch of insights and ideas in the Neil Patel article.

All you need to remember is try to make your emails useful, not promotional, and another essential point is regularity, but be careful—it’s a delicate topic. If you send emails too often, you could start annoying your subscribers and increase an unsubscribe rate.

Referral Program

To increase loyalty, you need to make friends with customers and work on retention. Personalize your communication, build an emotional connection, and create marketing offers to interest a specific customer.

Of course, don’t forget to thank those who have been with you for a long time and continuously maintain their loyalty. For instance, the Magecom team developed a referral program for Made Of—an online organic childcare supplier—which allows existing and frequent shoppers to earn money by introducing and signing friends up to the online store.

Upsell & Cross-Sell

Don’t forget about these tactics, as selling products that accompany a purchase generates more profit than selling to new customers and significantly increases the LTV/CLV ratio. 

As stated in the eCommerce Insiders article, upsells and cross-sells are responsible for about 10–30% of online sales revenue. All you need is to add a ‘Frequently Bought Together’ or ‘Product Recommendations’ section on the product pages and create a sense of scarcity or urgency to persuade your customers to buy more. You can also offer some special incentives that are hard to refuse, such as discounts or free shipping. 

Quality Support

According to the statistics, 56% of users change brands because of poor customer service and lack of feedback. 

Improve your customer service—we recommend you regularly monitor how things are going in customer support, find unsatisfied users, and solve their problems. 

Final Words

Lifetime value is a measure of how the company is doing. Determine the frequency and analyze your LTV regularly to stay relevant:

  • Boost the average check using incentive promotions, upselling, and cross-selling technologies;
  • Increase the frequency of purchases using different marketing channels;
  • Extend the lifetime of customers with loyalty programs and quality support.

Don’t be limited only by the general LTV indicator, as it’s average across the board and helps assess the situation as a whole but provides too little information for making decisions. It’s much more useful to calculate the value for individual customer segments and channels: search ads and contextual ads, email marketing, social networks ads, and organic traffic. 

How To Increase Customer Lifetime Value

Worry-Free Small Business Website Design and Hosting

eCommerce FAQs

Passionate advocate for digital inclusivity, leading the charge at Understanding eCommerce to provide web accessibility solutions for businesses and organizations. Committed to making the online world accessible to all.