How to Increase Customer Lifetime Value Online

The problem most sellers have is that, amidst the excitement of a new sale, they forget that what happens after is just as importan t. Oftentimes, once a sale is completed, both sellers and customers move onto their next goal. 

However, this means the seller has lost their chance to befriend a loyal customer.

The key on how to increase Customer Lifetime Value (CLV) is building a sustainable growth plan that focuses on retention and nurturing relationships throughout the customer lifecycle. Don’t let the high of a temporary revenue spike keep you from a lifetime of sales!

What is Customer Lifetime Value and why is it important?

CLV, or customer lifetime value, shows the total value of a given customer over a lifetime of interactions with your store.

How to calculate customer lifetime value:

To calculate customer lifetime value, we use this formula:

CLV= Customer Value x Average Customer Lifespan

Customer Value is the average order value of a given customer at the time of CLV calculation and Average Customer Lifespan is the time between their first purchase and the time of their last or most recent purchase (inactivity).

For example, let’s look at John. John has made three orders from your store, each totaling $75, $30, and $110. His customer value is (75+30+110)/3 = $71.67. It’s been 2 years since John’s first sale, so:

John’s CLV = $71.67 x 2 = $143

John’s customer lifetime value could use some work. Your goal now should be to strengthen your relationship with John by creating more opportunities for him to be satisfied with his engagement with your brand. An even lower CLV would mean that you should aim to re-engage that customer, potentially with a discount to incentivize them to buy from your store again.

How to boost customer lifetime value

While customer lifetime value can be attributed to a lot of things, mastering a few aspects of your store is key to maximizing this measurement. 

Your products

Your products are the main reason customers will flock to your store and keep coming back. It is an essential part to CLV - acquisition. Your products’ job is to show shoppers you are stocked with in-demand products and said products are relevant to each other and your store. Picking a dropship niche market will make this easier and extend the livelihood of your store because you’re curating products that cater to a specific group of people and their interests.  

Ask yourself these questions:

• Am I offering something of value to my customers? 
• If they can find these products or something similar elsewhere, what am I doing to make them buy from me?

Your brand

While it’s great that you’ve gotten your products sorted out, they alone will not create loyal customers. Your brand sets the stage for a customer’s first encounter with your business via an ad, a social media post, or the like. This moment determines whether or not they want to get to know your business more. Your brand should be a reflection of your products as well as your company values. Branding is also intensely visual, so a customer should be able to understand the essence of your business at first glance. 

Ask yourself these questions:

• What about my brand sets me apart from others?
• Is my brand all about selling my products or is there something that customers can connect with on a more personal level?

Your communication with your customers

CLV begins with a customer’s very first order. Undoubtedly, you’ll be interacting with them on your website and via email. Communication is crucial on both platforms, and your delivery will set the tone for a new relationship. 

However, this is just the beginning. Customers have yet to receive their products, so this is still a process to the finale of a first impression. Post-checkout, you’ll have numerous opportunities to continue your communication that will determine the probability of a second sale.

Ask yourself these questions:

• Am I talking with my customers like I would if this were an in-person interaction?
• What questions am I asking to find out if my customers are satisfied? What am I doing to remedy dissatisfaction? 

These three components work together to encourage customers to return to your store, but it’s absolutely essential that you remain consistent in your retention efforts, especially if you promote your store on multiple platforms like social media, email, and the like.

Strategies to increase customer lifetime value

Chip offers many tools to help you improve your CLV. Remember, it’s a lifetime relationship that you are aiming to establish, so make sure your store is equipped with tools that make this possible.

Fast checkout processes

Shopper accounts, Buy it Now CTAs, and more make the checkout process fast and easy. This is great for return shoppers who can just sign into their accounts and have their details auto-filled for a seamless experience.

Free shipping offers

Free shipping is a huge deal for most shoppers. In fact, 82% of consumers prefer free shipping to paying a fee that delivers their items sooner. When it comes to the initial stage of CLV, offering free shipping is a great way to improve your chances of making the first sale.

Coupons and promotions

If you’re trying to encourage a customer to buy again from your store, send a coupon to their inbox ASAP. Add a free shipping offer for a sure-fire way to get that sale!

Personalized email journeys

Post-purchase order confirmation pages and emails just don’t cut it anymore. Nowadays, you’ll need to develop a full post-purchase customer journey to keep customers engaged and interested in your store. Stay relevant and learn what your customers want.

The customer lifecycle, when done correctly, can lead you to an army of loyal customers. Ensure that every step of the journey is a pleasant experience and that no one gets neglected along the way. Maximize your customer lifetime value with everything Chip offers.