11 Proven Ways to Increase Customer Lifetime Value for eCommerce Stores

Of all the metrics you can track in your eCommerce business, Customer Lifetime Value (CLV, or LTV) is one of the best.

Just a small increase in customer lifetime value can deliver a significant boost in profit and revenue, without scaling acquisition cost.

In this article, we'll discuss why customer lifetime value is so important, how to calculate customer lifetime value, and finally how to increase customer lifetime value with a list of 11 proven strategies - including one that could 7x your CLV with zero effort from your team.

What is Customer Lifetime Value?

Customer lifetime value is the average amount of money each customer pays you over the lifetime of their relationship with your brand.

Let’s say a customer buys from your store four times in total, spending $20 each time. This makes their lifetime value $80.

Another customer buys only once, spending $50. Their lifetime value is… $50.

Customer lifetime value is often referred to by acronyms such as CLV, LTV and CLTV. These terms are generally interchangeable, and in most cases all refer to the same thing.

Why is Customer Lifetime Value So Important for eCommerce?

A high customer lifetime value is a great sign that your business is profitable, and provides more opportunities for growth.

If you were to focus your resources on growing CLV vs other metrics, such as sales velocity or conversion rate, it's almost always more valuable to work on CLV.

It’s often quoted that acquiring a new customer costs 5x as much as retaining or selling to an existing customer.

Customers who have bought from you before are easier to sell to, and spend more on average. The probability of selling to an existing customer is estimated to be 14 times higher than selling to someone new, while returning customers spend 67% more than first-time buyers.

The higher your average LTV, the more you can afford to spend on acquisition, and the faster you can grow.

It provides a safer business model, where you're less affected by algorithm changes, new competition, and rising ad costs, because you know you can depend on your existing customers spending more with you.

Ultimately, a higher LTV just lets you sleep better at night, knowing that you have a reliable audience you can sell to over and over again.

What is a Good Customer Lifetime Value?

It’s hard to give a standard benchmark for customer lifetime value, as each industry is different, and so is each business.

It’s possible to build a successful business with a low LTV, if you do a good job of acquiring new customers for a low cost.

It’s also possible to have a business with a high LTV that’s not very successful, if the total number of customers is low and/or each customer costs too much to acquire.

Benchmarks are generally looked at in terms of the ratio of customer lifetime value to customer acquisition cost (CAC).

In broad terms, a good ratio is around 3:1 (meaning your customer lifetime value is 3x what you spend to acquire each customer).

How to Calculate Customer Lifetime Value

To calculate your customer lifetime value, first find the following metrics:

• Average order value
• Average purchase frequency (how many times a customer buys from you on average)

Your CLV is the average order value multiplied by average purchase frequency.

So if customers average $50 each time they purchase from you, and on average each customer buys from you 3 times, your average CLV would be $150.

How to Increase Customer Lifetime Value in Your Business

Hopefully we’ve convinced you that CLV (or LTV) is important.

Now let’s talk about how to increase it.

Here are 11 proven, effective, actions you can take to boost lifetime value in your company, and ultimately get more revenue and higher profits.

1. Increase prices
2. Provide a great post-purchase experience
3. Automatic cross-sells and up-sells
4. Add complementary product lines
5. Sell subscription products
6. Create a loyalty program
7. Incentivize referrals
8. Use customer feedback
9. Use email, push and SMS
10. Prioritize segments with high retention
11. Launch a mobile app

Read on for a deeper look at how these actions can transform your business and help you get more out of every customer.

1. Increase Prices

Increasing your prices is the most straightforward way to increase customer lifetime value.

If, for example, you sell a product that’s $20, and customers buy on average three times, your CLV is $60.

If you were to increase your price to $21, and the purchase frequency is the same, your CLV would increase to $63.

Of course it’s not so simple in reality – increasing prices may lead to lower conversion rate or purchase frequency.

The key is finding the right price point where customers are happy and you’re making as much profit on each sale as possible.

Increasing prices is not always the most effective strategy, but consider whether you’re pricing your products too low and leaving revenue on the table.

2. Provide a Great Post-Purchase Experience

One way to boost lifetime value is to get customers returning and shopping from you more often.

To get them coming back, leave your customers with a good feeling from their last shopping experience.

A large part of that comes down to the post-purchase experience.

Too many brands ignore this; once they've closed the sale, they feel like the job’s done.

But paying attention to your customers after they enter their card details and click “Buy” can be the difference between a repeat buyer and a one-off sale.

Provide prompt order updates, check in to see if customers have any questions or issues with their order, and provide an awesome unboxing experience.

All these actions help your brand stick in the customer’s mind and leads to more repeat buyers.

3. Set Up Automatic Cross-Sells and Up-Sells

Once someone has made a purchase, they’ve signaled their intent, and that they trust you enough to buy from your store.

This is the perfect opportunity to sell more to them.

You could recommend other products related to their purchase which go well together, like a pair of shorts if they bought a t-shirt.

You can also up-sell them to higher priced items, such as a newer model of the item they’re about to buy.

Make this an automated process, by providing product recommendations on your checkout page, and/or in channels like email and push notifications.

4. Sell Complementary Product Lines

If all your products are the same, you won't have much opportunity to cross-sell and generate additional purchases from each customer.

If so, consider adding new products that complement your existing lines.

For example, if your store sells shoes, you can add socks, shoelaces, insoles, shoe polish.

Think about what else your target customer might be shopping for, and give them a reason to buy multiple items (or come back to buy from you again). 

5. Sell Subscription Products

Consumable products (e.g. makeup, supplements, food and beverages) are a highly effective way to get customers making multiple purchases from you.

If you’re selling these kinds of products, give customers the option to set up an automatic subscription that renews around the time they run out.

Subscriptions are convenient for the customer (they don’t need to remember to re-up; you can also give them a small discount on subsequent purchases to make it worth their while), and it increases the chance that they’ll come back and buy from you, instead of buying a competitor’s product instead.

6. Create a Loyalty Program

Reward people the more they spend with you and set up a loyalty program.

This is a powerful psychological tool to incentivize customers to shop with you more often, and spend more when they do.

According to the Bond Loyalty Report, 85% of shoppers say they’re more likely to shop with brands that have loyalty programs, and 73% spend more to maximize the benefits they get from loyalty programs.

Accenture Interactive found that members of loyalty programs generated 12-18% more revenue for brands than non-members.

Adding a loyalty program is an easy win for brands looking to boost LTV (check out our list of the top Shopify loyalty program apps to learn how to set one up for your brand).

7. Incentivize Referrals

While referrals are designed to introduce new customers to your brand, they also help you get more from your existing customers.

Referrals have a subconscious effect on the referrer. By recommending your brand to others, they’re deepening their own loyalty, and are more likely to shop again themselves.

That means the benefits of referrals are twofold – increasing your customer base, and deepening loyalty from your existing customers (leading to higher average LTV).

(These Shopify referral program apps make it easy for you to reward your loyal brand advocates for promoting your brand).

8. Request, Respond To, and Action Customer Feedback

The best way to understand what makes customers come back and shop with you more often is to ask them.

Communicate with your customers and get feedback on everything from the quality of your products, to their purchase and post-purchase experience.

Reaching out to customers for feedback, and taking action on that feedback, does two things.

First, it gives you a chance to fix any issues or complaints, turning unhappy customers into happy customers.

Second, it makes your customers feel heard, and deepens customer loyalty in the process.

Both result in more repeat buyers and a higher average lifetime value.

9. Use Email, SMS and Push Notifications to Generate Engagement

Use a variety of communication channels to engage your customers and keep them coming back to your store.

Regular contact with your customers keeps your brand top-of-mind, and provides the push some customers need to jump in, browse, and ultimately make another purchase.

Email, SMS and push notifications are all great tools for this – push notifications especially, as they’re cheap, low friction, and highly visible. 

A couple of short, sharp messages each week can be enough to increase purchase rate and get a significant amount of new revenue from your existing customers.

10. Identify & Prioritize Customer Segments with Higher Retention

You’ll find that some customer segments have a higher LTV than others.

These are your most valuable customers, and the type you want to attract more of.

Instead of putting out a broad net in your customer acquisition strategy, focus your marketing strategy and ad spend on bringing in the type of people who are more likely to become repeat buyers and loyal fans of your brand.

11. Launch a Mobile App

One of the most powerful ways to increase customer lifetime value is to launch a mobile app.

Mobile apps are tailor-made for increasing loyalty, retention and generating more long-term revenue from each customer.

App users shop more often, and they buy more in each purchase, which adds up a significant gain in lifetime value.

And access to mobile push notifications gives you a powerful tool you can use to drive even more revenue and engagement.

Using MobiLoud to build your app, you can go live in less than a month, with minimal work required, low cost and little to no overhead.

Our app revenue calculator gives you an idea of how much new revenue you can expect from launching an app – a large share of which comes from your existing customer base.

By launching an app, you could increase customer lifetime value on mobile as much as 700%, as Rainbow Shops did with their app.

"We find that users who prefer to interact via an app are more loyal, buy from us more often and spend more time with our content.”

- David Cost, VP of eCommerce & Marketing at Rainbow Shops

Why Mobile Apps are the Best Way to Boost Lifetime Value

Nothing has as big an impact on lifetime value as launching a mobile app.

You’re giving your best customers a seamless way to get back in your store and make repeat purchases.

One tap and they’re in – no messing about with URLs or the distractions that come with shopping on a mobile browser.

The shopping experience in an app is more efficient than in mobile browsers, which is important with a higher percentage of consumers each year preferring to shop on mobile.

This leads to more time spent browsing your store, a higher average order value for people who shop in your app, and more repeat purchases.

The app icon on their home screen keeps your brand top-of-mind, and you can use push notifications to boost familiarity, loyalty and engagement even further.

When the cost is low enough (as it is with MobiLoud), you can add a huge amount of new revenue for your business by giving your best customers an easy reason to spend more, and buy more often.

Want to learn more about how to increase customer lifetime value by launching your own mobile apps? Get in touch with us and book a free consultation now.

Launch an App and Increase Customer Lifetime Value Now

If you don’t already have an app, but you have an optimized, mobile-friendly website, launching an app is easy.

MobiLoud lets you turn your website into a mobile app for zero effort and low cost.

You don’t need to spend hundreds of thousands of dollars on developers to code your app, and you don’t need to rebuild your website within the constraints of a template-based app builder.

MobiLoud converts your entire site, including all its features, tools, integrations and design, into apps with a fully native look and feel.

The apps will be fully synced with your website, meaning little to no maintenance load and overhead.

Whenever you update your website, your apps will update with it. No duplication of effort required.

To get an idea of what’s possible, get a free demo now.

We’ll walk you through the process, and let you know how easy it is to grow customer lifetime value with your own mobile app.