Increase the Customer Lifetime Value (CLV) of your Shopify store!
Customer lifetime value (CLV) is an important element that will give a breakthrough to your business. Maybe you’ve rarely heard about it, but if you are reading this article it means that you left nothing to chance.
Therefore, I suggest you to read it carefully because I will describe in a few simple words the concept of Customer Lifetime Value (CLV) and you will be able to increase it thanks to a Shopify App. Try to believe!
What is Customer Lifetime Value?
Customer Lifetime Value represents the total amount of money a customer is expected to spend in your business or in your products, during their lifetime.
Now let’s concretely apply it to reality, the e-commerce can be a good example. Your task, from the moment a customer arrives on your online store, to the moment he makes the first purchase, is to capture him and make sure that his relationship with your company lasts over time. This means that you must never stop courting the customer, communicating safety, sometimes provoking to ensure that he won’t be bewitched by the competition.
So, the CLV is based on the consumer behaviour over time.
How to measure CLV?
The customer lifetime values metric is used for a variety of marketing and analytical purposes. Today there are many different formulas used to calculate it. Here there are a few simple steps that will help you to understand better:
- It is essential to have a customer database that also contains information about the purchase history;
- Create an accurate customer journey;
- Measure profits for each individual point of contact where the customer creates value;
- Update data for the duration of the relationship with the customer.
Now I can provide you with one of the basic formula to calculate the CLV, keep in mind that it is just one of many that can be used. Here it is:
And in practice? If a customer makes a purchase of £300, repeating it with an average of two times in a year, and has an average life of 3 years, then the gross value of this customer will be £1800.
Following the formula: (300) x (2) x (3) = 1800£.
Why CLV is important?
Now let’s try to understand why this value is so essential and how it can improve your business.
Customer Lifetime Value enables companies to focus on maintaining and caring for customers that generate high long-term value. Thanks to CLV, the company will be able to obtain important information understanding how to implement more effective marketing strategies, improve interactions with current customers, develop programs to increase consumer loyalty and have an estimate of actual revenues for each client. Together, these types of actions can significantly boost your business profitability.
For this reason it is important that companies focus on the value of already acquired clients.
What are some strategies used to increase CLV?
Once your company knows the CLV of each customer, they will be able to understand which one will be the most profitable during a specific period of time. Let’s discover together some of the strategies used to increase the Customer Lifetime Value:
- Increase client satisfaction: focusing and offering him the best possible experience; Did you know that, in a Temkin Group study, it was found that 86% of client who had a great customer experience were more likely to buy back from the same brand?
- Understand customer behaviour and look for repeat purchase: take care about users, especially their needs and motivations that lead them to buy. In this way your company will be able to implement strategies to always offer the highest value. A loyal customer is oriented to repetitive purchase, because he is aware that the company has the solution to his problems;
- Customer support: make sure you are available to help them when they need you and to find a solution to their problems;
- Increase the retention: You need to strengthen relationships to increase loyalty. If you maintain a relationship with someone who has already purchased, your initial investment will be much more profitable;
- Adapt to customer value and engage them regularly: people feel closer to brands that share their own values and beliefs. It is necessary to send the right message at the right time and through the right channel;
- Offer personalized interactions: for example through email messaging;
- Give a plan for every need: customer loyalty programs keep client engaged and reward frequent purchases. The advantage for users can be discounts or promotions. Incentivizing them to return can increase the consumers’ purchase frequency.
... And now? 🤔
Now that I’ve shown you how important it is to measure the Customer Lifetime Value of your brand I can give you the solution to do it.