Are You Doing What Is Needed to Improve Your Customer Lifetime Value?

Tina Donati
Tina Donati
August 5, 2022
2 min read
Are You Doing What Is Needed to Improve Your Customer Lifetime Value?

In this article

Every successful business has strategies to improve both customer acquisition and retention. Simply put, you can’t have one without the other if you want to grow.

How can you measure the retention side of your business? Customer lifetime value, or CLV, is one metric you should be tracking closely to understand your success.  

CLV tells you how much your business can plan to earn from the average customer throughout the entirety of your relationship with them. And in all honesty, improving your CLV is a never-ending battle.

Your strategy must be holistic, taking into account your engagement metrics, your product quality, your customer service, and your marketing initiatives. That’s why it’s important to monitor your data and discover new ways you can level up your customer experience and keep people happy long-term. 

That being said, it’s important to note that improving your CLV isn’t a one-size-fits-all solution. What works for some brands won’t work for others. It varies by industry, product, and brand. You need to focus on finding out what your customers respond to and build your strategy around that.

Today, I’m going to show you a few different ways you can improve your CLV based on tips I gathered from ecommerce experts who have successfully raised theirs.

How important is CLV?

Improving your CLV is more than a single retention metric—it impacts all areas of your business. 

As Lillie Sun, DTC Strategy Consultant, explains: “Acquisition is only one part of the equation. Your ability to retain customers and have them continue spending with your brand is ultimately what separates successful companies from ones that aren’t.” 

Keep in mind that existing customers spend 67% more on average than new customers. While it can be difficult to find out what makes your customers tick, once you do, you’re well on your way to seeing fast growth.

We asked a few other ecommerce experts to share why this metric is important to them. From growth, and word-of-mouth marketing, to reducing your churn rate, there are many reasons to improve your CLV. 

CLV and word-of-mouth marketing (WOM)

People are more likely to talk about your brand if they feel loyal to it. 

What does that mean? If your products are a regular part of shoppers’ routines and they’re consistently impressed with the quality, they’ll share those experiences with friends and family.

“A strong CLV means your customers will help you grow as well through word of mouth marketing. As they become valuable, loyal customers, chances are they’ll spread your brand to their community and friends and that is a huge growth channel to take advantage of,” Lillie explains.

Considering WOM brings in 5 times more sales than paid media, you may want to take Lillie up on this advice. 

CLV and growth

Every team will always grind away at customer acquisition; it’s essential for growing your revenue year over year. 

However, as Dave Rekuc, President and COO of BambuEarth explains, a high CLV means you don’t have to be 100% reliant on new acquisitions to succeed. Even during difficult times or slow periods, you’ll have a group of loyal customers you can rely on to drive your brand forward.

Dave shared with us that “CLV provides stability in the event of some rough times acquiring customers. Platforms make changes, CPMs rise, and your ads just aren't working. Brands that have high CLV can lean on their customers’ repeat revenue, and the ship won't sink if they have an off month or two.”

And for many brands, especially in high-competing industries, prioritizing CLV helps compound the expensive cost of customer acquisition. 

For example, Robert Weatherhead, Co-Owner of BonCru Wines, shares how CLV is critical for his business because he is a reseller of wines that are typically available in certain brick and mortar stores. 

“We face a constant battle with getting people to buy from us over our competition. This means the cost of acquiring the first sale is steep, so keeping them as a customer and optimizing for CLV is crucial to growing our business profitably,” he explained.

CLV and churn

A high CLV is a good indication that customers are having a good experience shopping at your store. In fact, 49% of consumers tend to leave a brand due to poor customer experiences.

This means you can use your CLV to determine whether you need a CX tune-up

If your CLV is lower than you need it to be, it’s time to look into techniques to improve it. Thankfully, we have a few tips on how to do that.

5 ways to double down on CLV

The good thing about growing your CLV is it’s never too late to start. We asked the pros to share some tips for you all, so here are five key considerations to improve your CLV both short-term and long-term.

1. Don’t forget the basics

I know what you’re doing… you’re scanning Twitter, reading articles, and following your competitors and inspirers closely trying to come up with super creative ways to impress your customers.

It’s okay to be influenced by others who are growing their CLV successfully, but remember, it's always good to go back to the principles and build a strong foundation. So don’t forget to start with the basics. 

Robert Weatherhead explains why: “Our approach is not rocket science. It comes down to the basics of marketing in a competitive industry. We aim to consistently remind people we exist, and give them reasons to come back.”

What do we mean by basics? Essentially, these five components:

  1. Being consistent with email marketing flows and campaigns
  2. Creating content and landing pages optimized for keywords
  3. Maintaining an organic social media strategy 
  4. Setting up good customer support systems 
  5. Optimizing for a fast-loading website that’s easy to navigate 

In fact, a consistent email marketing and social media strategy is a big reason behind Robert’s success. Even though he admits he hasn’t gotten overly creative with his approach to CLV, being consistent on these two channels alone has improved his customer return rate by over 50% in one year. 

“We have customers who have spent thousands with us over their lifetime, and we still see customers return through our emails who haven't purchased in 18 months, sometimes longer. The cost of bringing them back via email is peanuts compared to finding a new customer and convincing them,” said Robert.

But when it comes to email marketing, the trick isn’t to just send customers anything and everything. To be truly successful, it requires a deeper strategy, so let’s look at what that means.

2. Invest in strategic email marketing

Lillie Sun is a full-time ecommerce consultant now, but before that she worked in-house at a successful beauty brand. As the growth lead for this brand for two years, Lillie believed it was important to invest resources into a thoughtful email marketing strategy. 

To Lillie, this meant carefully segmenting the brand’s email list so customers received the right email at the right time. And instead of trying to constantly sell to shoppers after they just purchased, she would be more strategic about targeting customers when they were running low on products.

“We had our list segmented by skin concern so all of our messaging were extremely relatable. This led to our monthly revenue being about 30% driven by email and seeing 35%-40% returning customer rate consistently,” she said.

To gather this detailed customer information, Lillie invested in an Octane AI quiz to ask customers about their skin concerns and goals. She would then segment those customers in Klaviyo and create custom flows for shoppers to educate them about products that would target their problems. 

Speaking of quizzes, did you know they can help your customers avoid user error too?

3. Help customers avoid user error

A quick recipe for customer churning is when they purchase the wrong product for their needs. But on the flip side of the coin—if they use your products successfully, they’ll be more likely to stick around long-term.

A quiz can help your customers by guiding them to the right products.

In most cases, shoppers don’t know which products in your catalog will help them overcome certain pain points. If a customer has oily skin, they may accidentally purchase something for dry skin. If a shopper has wide feet, they may accidentally purchase sandals for thin feet. You get the picture.

With a quiz, you can ask customers detailed questions about what they’re looking for and direct them to the right products. 

“Our quiz helps customers select the right products for their skin. User error is real and customers don't always know what's right for their needs. Helping people buy the right product means they'll be more satisfied with their purchase. Increased satisfaction leads to more purchases on average,” said Dave Rekuc. 

This strategy has been incredibly successful for Dave to increase Bambu Earth’s CLV. He uses a tool called Statlas to track CLV, and as an example, he found that if a new customer purchases one of Bambu Earth’s moisturizers (one of their most popular products) they’ll spend another 25-35% on average over the next 60 days. 

However, if someone purchases a personalized mini kit through Bambu Earth’s skin quiz, they’ll spend up to 60% more over the next 60 days, which is more than double the 60-day post-acquisition value.

4. Leverage loyalty and referral programs 

Consider this: 65% of all consumers find a positive experience with a brand is more influential than great advertising. Additionally, customers referred by other customers have a 37% higher retention rate

Why are those two statistics important? 

Because a good customer experience leads to loyalty which leads to those customers organically referring your brand to others. And since referred customers are more likely to stick around long-term, having a referral program is a great tactic for driving up both your acquisition and CLV through simple customer appreciation.

Note: a good referral strategy doesn’t mean launching a program and assuming it’ll work on its own. It requires deep planning, a proper launch, and additional promotional effort.

But when done well, it works.

“High CLV customers have a better chance at serendipity to mention your brand.” - Dave Rekuc, President & COO Bambu Earth

5. Create and distribute educational content

Remember when I mentioned earlier the importance of customers using your product correctly? Well, that goes beyond just finding the right product. It also includes educating your customers on how to use your products so they see the best results.

Bambu Earth does this in various ways: they have tips on product landing pages, how-to videos on social media, and application steps on certain product pages.

“We noticed many of our customers didn't make a repeat purchase simply because they didn't use our products correctly. This is a great problem to discover because it means there's a tremendous opportunity,” explained Dave Rekuc.

He suggests investing in how-to videos and educational email flows, while also making sure your customer service team is proactive about solving these questions for new customers. 

Grow your CLV today, thank us tomorrow

So now you’ve learned how CLV impacts different areas of your business and different strategies you can implement to improve it.

What’s next?

Coming up with an actual plan. 

And as experts in retention and word-of-mouth marketing, we can help. Let’s look at a few articles to kickstart your CLV strategy: 

Alternatively, come join us at The CLV Revolution, the first ever global event dedicated to mastering Customer Lifetime Value. In a world rapidly shifting from acquisition marketing to lifecycle marketing, ecommerce owners are realizing the key to business success lies in building profitable and long-term customer relationships. Join us and 30+ global ecommerce leaders this September 22-23 and discover how to improve ROAS, reduce costs, increase retention rates, boost client satisfaction and grow revenue using the power of existing customers!

Tina Donati
Tina Donati

Tina Donati is writer, storyteller, and ecommerce enthusiast. With over five years of writing experience, she currently works full time as the content marketing lead at Alloy Automation, while running a freelance writing business with clients in the ecommerce B2B SaaS and agency niche. Living and breathing content 24/7, Tina has worked with clients across the globe. She holds a Master’s degree in journalism and communications, which has helped her combine advanced storytelling and investigative journalism techniques to hunt down credible sources for her writing. Passions aside from writing? Geeking out over SEO, walking her dogs, and hunting for the best burrito.

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