Increasing customer lifetime value should be a guiding principle for your business. Whether you’re brainstorming new products, services, or executing marketing campaigns—retaining existing clients has always brought with it more value than trying to entice new ones. In today’s article, we’ll discuss ways of boosting CLV, and suggest metrics to track and measure your success.
Defining Customer Lifetime Value
First, let’s establish a working definition. In essence, customer lifetime value refers to the total revenue a business will generate from a customer’s account throughout the entire lifetime of the relationship.
The importance of boosting CLV should not be understated. To put things in perspective, once your business has locked a customer down, it’s unlikely they will concurrently want to seek out the services of another business in the same sector. This is a two-way street, and your competitors’ existing customers are not incentivised to rely on two companies providing the same type of service.
In other words, signing on a new customer is significantly more difficult, as it hinges on the customer likely ditching their previous service provider. Therefore, increasing customer lifetime value is incredibly important to prevent them from wanting to leave you.
Why Does Increasing Customer Lifetime Value Increase Your Bottom Line?
As explained above, retaining existing customers costs significantly less than acquiring new ones. Some figures point to this cost being 5 or 25 times as high when compared to retention costs! This relates to the simple fact that customers that stick around for longer provide a better ROI on your marketing efforts, as they buy more products or services from you.
Additionally, these customers typically spend more per purchase, are more likely to try out your new releases, and recommend you to their friends and family. Eventually, the snowball gets rolling much faster, and the accumulated momentum from your loyal customer base is what keeps powering your business.
Key Strategies for Boosting CLV
With all that talk behind us, let’s dive into the specifics. Here are some proven customer retention strategies that you should consider for your business:
Improving Onboarding
First impressions matter most. If your interfaces are unfriendly, unintuitive, and your onboarding feels lackluster, you’re likely scaring away new customers before they get going properly. The first 90 days are absolutely critical for customer retention. This is when they either fall in love with your product or service or reject it entirely.
Start by creating a welcome sequence to guide your customers through the essential features. Don’t overwhelm them with everything all at once, though! You might also consider cheering them on through success milestones, automated e-mail campaigns, or in-app notifications. Keep your customers engaged, make them feel welcome, and make sure they have everything they need.
Fixing Your UX
User experience (UX) plays a major role, too. An unintuitive app or website full of friction points leads to churn, abandoned shopping carts, and even loss of business.
To that end, perform extensive research and testing to monitor your user’s behaviour and tendencies. You may even want to go all out and order a UX auditing service to hire someone and go through every possible user journey to find out what works and what doesn’t.
💡 Need a more detailed guide? Take a look at our article full of UI/UX design best practices for your Shopify homepage!
Loyalty Programs
Build a tiered rewards system that makes the customers feel valued while encouraging more spending. This can come in the form of points, special discounts and offers, or exclusive access to new releases.
The key is to strike the right balance between offering attainable rewards to motivate customers to spend more while also making them attractive enough to matter.
Up-Selling and Cross-Selling
This one is simple, really. Whenever your clients purchase something, jump in with the extra opportunity to bundle the product or service with something else. Make sure it’s always something relevant that increases the value of the original purchase.
For example, when they receive an offer for a protective case and screen guard after buying a phone or laptop, it lifts the burden of even having to think about those things from their shoulders, making them appreciate you more. These types of strategies rise in importance greatly around prime selling seasons, for example around Black Friday or the Christmas Holidays, as that’s when the potential for up- and cross-selling really shines.
Measuring the Success of Your CLV-Boosting Initiatives
You’ve implemented some of the above strategies, now, how do you track their effectiveness? The most important KPIs to follow—those that reflect customer value and engagement—will be the following:
- Repeat purchase rates
- Churn rates
- Engagement metrics (e-mail opening rates, customer service interactions like surveys and feedback)
- Net Promoter Score
- Redemption rates for loyalty programs
The most important one that you’ll likely want to focus on will be the churn rate. If it decreases over time, it’s a good sign you’re doing something right!
Of course, having a robust tracking system beforehand will help you out tremendously, as it will serve as a baseline point of reference to compare.
The Takeaway
There’s a whole host of reasons behind why your E-commerce business might fail, and a lack of emphasis on customer retention may be one of them. By carefully rethinking your customer retention strategies, you can build a more sustainable business model that focuses on long-term customer relationships rather than constant acquisition. As explained, this is the more desirable outcome due to the savings potential and possibility of a powerful snowball effect.
You may also read: How to Increase Customer Loyalty: 10 Great Shopify Loyalty Programs
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