3 Steps to Improve Ecommerce Customer Lifetime Value

“One and done” should be a phrase that online retailers avoid like the plague.

Unfortunately, far too many online retailers have settled with this approach when it comes to their digital marketing engine. They dump thousands of dollars in upfront costs to convince prospects to stop by their ecommerce store, but as soon as shoppers click “buy,” you can hear the aforementioned marketing engine sputter to a halt. 

While getting first-time customers through the door is essential to growing your online business, it’s extremely expensive and cost-prohibitive. We’ve all seen the stats—it can cost anywhere between 5 and 25 times more to earn a new customer than retain an existing one. 

Instead of focusing on acquiring new customers, ecommerce retailers need to shift their attention to a different metric: Customer Lifetime Value (LTV or CLTV). LTV is a sweet medley decided by how much money each customer is spending, how often they’re shopping, and the time between now and when they last shopped with you. Or, as we like to call it, customer loyalty. 

It’s high time to ditch the idea that “more customers is always better” and reframe your thinking to “more loyal customers is always better.” So, let’s get started and see what you can do about upping your own shop’s customer LTV.  

What is customer LTV in ecommerce?

Customer Lifetime Value (LTV or CLV) in ecommerce is the total revenue an ecommerce business receives from an individual customer over the time that customer continues to patronize the business. Essentially, it is how much a business makes off a single customer who provides repeat business. This can be combined with customer acquisition cost (CAC), which determines the costs of acquiring that customer through things like marketing campaigns. Ideally, the LTV would be higher than the CAC. 

Why does LTV matter in ecommerce?

LTV is one of the most important ecommerce metrics in part because ecommerce conversion rates are frustratingly low. 

The average conversion rate in ecommerce hovers around 2.8%. 

That means that 97.2% of shoppers that see your ads or promotions visit your site, take a gander, and bail. That’s a lot of eyeballs driven by your marketing efforts that aren’t willing to pull out their wallet. 

There are TONS of resources on how to improve conversion rates. Tips as simple as adding a layer of order protection to your checkout flow to more complex things like dynamic product recommendations and pricing. But when it comes to content about improving the customer experience… less.

Taking advantage of each and every customer you get is becoming increasingly important, and brands that really want to win in the coming years will do well to focus on the 2.8%, and not the 97.2% of lost sheep (go after them, too… but you get the point).

What does a loyal customer look like?

In the most simple terms, a loyal customer is anyone who repeatedly purchases from the same company regardless of purchase frequency. However, according to Bluecore, 60% of second purchases occur within the first 100 days, and—here’s the exciting part—two-time purchasers are 95% more likely to make a third purchase than one-timers. 

That’s just five percent short of guaranteed revenue.

When we talk about crafting a strategy around LTV in ecommerce, it’s all about shifting your focus toward creating as many repeat purchasers as possible, and earning the second purchase is a huge win for loyalty(and your profit margins).

LTV sweeps away all other metrics and focuses on long-term value. It ignores the highs and lows, seasonal spikes, and flash sales, and instead, it offers a balanced view of your ecommerce world. It gives you a clear picture of how much each existing customer is actually worth to your bottom line, which empowers you to optimize your spending to build a truly profitable online business.

Now that we understand that LTV is awesome, let’s get into the good stuff.

3 Ways To Increase Your Ecommerce LTV

1. Find your vibe & build your cult following

In Fearless Writing, author William Kenower says that readers care less about what happens in your book and more about how they feel when they’re reading it. In a similar vein, your customers do care about the product they’re buying (else, why would they be buying it?), but they also care about how the product makes them feel. 

A lot of brands embody particular lifestyles, aspirations, and ideas. And the more these brands can help consumers see themselves living these desired lifestyles, the more loyalty they’ll accrue. For example:

When working on strategies to improve your customer loyalty and increase LTV, you need to remember that you’re selling an emotion—a lifestyle—that’s just as important as your products. People want their brands to stand for something, represent their interests, and align with their own life. But to do this successfully, you need to do more than just blast a catchy hashtag on your social accounts. If you’re gonna talk the talk, you need to walk the walk:

2. Provide 5-star customer service

Customers will continue to do business with you until you give them a reason not to, whether that’s stonewalling them after a complaint or delivering shoddy products. Nearly half of customers will take their business to a competitor after just one negative customer service experience. Customer service needs to be better than average to build loyalty:

3. Take a personalized omnichannel approach to the customer experience

Creating an environment where your customers and target audience is consistently exposed to your message is critical to increasing LTV. Whether it’s posting helpful how-tos on your blog, sending thoughtful newsletters, or engaging with your customers’ post purchase, extending your brand experience across various channels can score you way more than brownie points.

The post-purchase experience is the most memorable part of the brand experience for nearly 50% of consumers.

Route bridges the gap between the moment someone buys and the moment they receive their item. We offer a solution that empowers merchants to stay present while goods are in transit. With Visual Tracking™, easy claim filing, and simple problem resolution, customers are met with a new peace of mind about their products, their purchase, and your brand.

🔥 Visual Tracking™ provides an engaging post-purchase experience that reduces WISMO calls by 45% 

🔥 Proactive shipping notifications keep your customers up to date and boost branded impressions by 126%

🔥 26% of brand profile visitors convert back to your website

Create the post-purchase experience
of your customers’ dreams 

See Route in action

Treat customers the way you want to be treated

Developing customer loyalty isn’t easy, and sometimes it takes little more than one negative experience to shatter it. However, upping your repeat customers count doesn’t have to be an overwhelming battle. All it takes is spending a little less time acquiring new customers and spending a little more time nurturing the ones you already have.

While these are three rock-solid strategies to get started with, there are endless ways to surprise and delight your customers so that they keep coming back for more. From friendly notes to surprise coupons and relatable content, the key to keeping customers close is bringing humanity to everything you do. 

In the end, every customer can be a loyal customer if companies focus on delivering a personalized and authentic experience regardless of time, place, or medium. Treat your customers as you would old friends and watch their LTV climb.

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