Customer lifetime value (CLV) is an important business metric that measures the value a shopper brings to a brand or retailer in their entire time as a customer. It helps brands and retailers budget their funds into customer acquisition and retention.
Marketers usually determine the average order value, calculate the average transactions in a given time, and observe customer retention. They then multiply all three to get the CLV.
Why is CLV Important
CLV matters because brands and retailers get more value from nurturing existing customers — loyal customers spend more on their preferred brands’ products and services. Marketers also spend less on the customers that they already have compared to the customer acquisition cost. Knowing the CLV helps them devise marketing strategies to invest in the right customers and improve customer retention.
The customer lifetime value also is a good indicator of business health. It helps businesses ascertain if the revenue generated is steady, courtesy of regular customers, or one-time buyers. In general, loyal customers are instrumental in driving company growth. Determining the CLV allows brands to continuously meet or exceed their customers’ needs and maintain their engagement and buying interests.
How to Boost Customer Lifetime Value
Here are some of the ways you can nurture existing customers and boost your customer lifetime value:
- Enhance the customer experience. Everything on your site should make it easy to connect to a product. This can mean ensuring navigation is easy and seamless, adding product recommendation carousels, and enabling visual search. Customers are more likely to return when everything in the shopping journey is smooth.
- Encourage repeat purchases with a rewards program. Give customers an incentive for coming back for more. You can offer points that take off from their future purchases or provide free shipping. This can increase the frequency of purchases in any given amount of time.
- Ensure a smooth return process. Just like reliable customer service, a seamless return process can instill trust in customers and help increase customer lifetime value. They know they can count on you in case they run into problems with their purchase, which then encourages them to return to you for more in the future.
- Keep in touch with newsletters and emails. The connection between a brand and a customer does not have to end with a purchase. Make sure you remain in customers’ minds by regularly reaching out to them, introducing them to new products and services, and offering exclusive discounts and promotions.
- Engage customers in social media. Meet your customers where they spend time the most. You can convey that you are easily reachable by interacting with your customers on social media platforms. Brands can keep engagement ongoing by introducing new offerings with regular and scheduled posts.