How to Increase Customer Lifetime Value for eCommerce (11 Proven Strategies)

There are a thousand metrics you can track in your eCommerce business, and many are, frankly, not very useful.

Customer lifetime value is not one of those metrics.

Increasing your customer lifetime value – even a minor increase – can have a huge impact on your profit and revenue. And brands often find that this is the most cost-effective way to drive more sales and grow their business.

Read on to understand all there is to know about customer lifetime value for eCommerce, and for a list of actionable tips to help you get more out of your existing customers.

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 Stores?

In any business, there are three ways to increase revenue:

• Get more customers
• Get customers to spend more per transaction (e.g. basket size)
• Get each customer to buy more often (e.g. purchase frequency)

Two of the three are directly related to customer lifetime value, and boosting CLV has a carryover effect that helps increase the other.

Let’s dive deeper…

It’s Cost-Effective

It’s more cost-effective to focus on increasing basket size and purchase frequency than acquiring more customers.

It’s often quoted that acquiring a new customer costs 5x as much as retaining or selling to an existing customer. That’s because you know what they like, you know what they respond to, and you know they’re interested in your brand.

You don’t need to go through the process of marketing to people who don’t know you, and convincing them that they need to buy your products.

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.

Higher CLV lets you spend more on acquisition

The higher your CLV, the more you can afford to spend acquiring new customers.

Every brand has a limit to how high their customer acquisition cost (CAC) can get while remaining profitable.

For example, if each customer pays you $20, and $10 of that is profit, you can basically afford to spend an average of $10 to acquire each customer before you’re losing money on each sale.

This limits how much you can spend on marketing, ads, etc, to grow your business.

If you get more money out of each customer (for example if most customers come back and buy a second time, or spend more in each basket), you can spend more on acquisition, meaning you may be able to scale your ad campaigns more effectively and reach a wider audience.

Customers who spend more are more valuable

File this under “duh, of course”. But it’s not just in terms of the money they spend with you.

Higher CLV is generally linked with higher retention and loyalty, because most brands with high CLV get there from generating more repeat purchases.

Customers who buy from you multiple times are more likely to be the kind of loyal, brand advocates who do more to grow your brand outside of just spending money.

They talk about your brand to their friends, they write good reviews, they post UGC (user-generated content, such as social media posts) that grow your brand’s image and introduce new customers to your business.

Businesses with high lifetime value are more resilient and have more predictable revenue

Higher CLV gives you a safer business model, more resilient against the twists and turns that come with the territory in eCommerce.

You’ll feel less of an impact from increased competition, or if things go wrong, like ad accounts getting banned.

It gives you more predictability knowing that your customers are likely to buy multiple times, and thus makes it easier to plan ahead and make investment decisions to grow your business.

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.

11 Ways to Increase Your CLV/LTV

Hopefully we’ve convinced you that CLV (or LTV – remember, they’re generally interchangeable) is important.

Now let’s talk about what you can do about 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

The most straightforward way to increase CLV is to increase your prices.

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 quite so simple in reality – increasing prices may lead to a decrease in conversion rate or purchase frequency. So 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 won’t be the most effective strategy in all cases, but it’s worth considering whether you’re pricing your products too low and leaving revenue on the table as a result.

2. Provide a Great Post-Purchase Experience

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

To get them coming back, you want to 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; they closed the sale already, and 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.

This means providing prompt order updates, checking in to see if they have any questions or issues with their order, and providing an awesome unboxing experience.

All these actions will help your brand stick in the customer’s mind and get more customers coming back to buy again.

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 might go well together, like a pair of shorts if they bought a t-shirt.

You can also up-sell them to higher ticket purchases, 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 thing, you might not have much opportunity to cross-sell and generate additional purchases from each customer.

If so, you could consider adding new products that complement your existing product 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’re likely to run out.

This makes it easy on 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 hugely 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 CLV (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 can 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 will make customers come back and shop with you more often is to ask them.

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

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

First, it gives you a chance to fix any issues your customers have, and second, it makes your customers feel heard, and deepens customer loyalty in the process.

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

Use all the communication channels at your disposal to communicate with your customers and get them to engage with your brand more often.

Regular contact with your customers keeps your brand top-of-mind, and may be 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 get your customers coming back and buying more regularly.

10. Identify & Prioritize Customer Segments with Higher Retention

When you dive into your analytics, you’ll likely find that some customer segments have a higher CLV than others.

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

Instead of putting out a broad net in your customer acquisition strategy, focus your marketing strategy 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

Our final tip (yet possibly the most effective strategy at your disposal to boost CLV) 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 – almost all of which comes from generating more revenue from your existing customer base.

Why Mobile Apps are the Best Way to Boost CLV

There’s nothing that has as big of an impact on CLV 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 share 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.

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 one is easy.

MobiLoud helps you turn your website into an app, for a minimum of effort and expense.

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 show you an interactive preview of your site as an app, walk you through the process, and let you know how easy it is to grow customer lifetime value with your own mobile app.