How to Increase Customer Lifetime Value: 13 Proven Tactics
Posted by Julia Morrissey on May 9, 2024
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Understanding and optimizing customer lifetime value is essential for brands looking to build sustainable growth, foster customer loyalty, and increase profitability over time.
Retailers seeking to drive customer lifetime value should start by examining their in-store and mobile shopping experiences.
In this article, we cover:
Customer lifetime value (CLV) refers to the ultimate dollar amount a company is likely to gain from an individual customer during the lifespan of that customer’s relationship with the brand.
By analyzing CLV, businesses can make more informed decisions regarding customer acquisition, retention, and marketing strategies.
Calculating customer lifetime value involves estimating the revenue that a customer will generate over their entire relationship with the company and subtracting the costs associated with serving that customer.
Customer lifetime value serves as a great method for highlighting whether a brand’s retention efforts and spending on customer acquisition efforts are successful. It also helps companies assess profit margins and forecast future revenue. Additionally, the more that brands understand how their customers shop, the easier they can use that information to tailor their promotional tactics.
To increase customer lifetime value retail brands must focus on strategies that foster long-term relationships and repeat business. By implementing targeted initiatives that prioritize customer satisfaction, engagement, and loyalty, brands can maximize the value of each customer over their entire lifecycle. Below, we detail how to increase customer lifetime value through the creation of streamlined, impactful shopping experiences.
Consumers will be much more likely to first enter a store, and later make a purchase, if they don’t spot long lines stemming from the checkout counter. To combat extensive waiting periods, brands can equip their sales associates with mobile point-of-sale (POS) devices that allow associates to check out shoppers from any point in the store.
Ensuring customers know they can still obtain an out-of-stock item through your company is crucial; otherwise, the sale is likely lost. With the endless aisle approach, you eliminate concerns about customers leaving empty-handed and disappointed – every product, color, and size is readily available for purchase. By salvaging these sales, retail brands enhance the shopping experience and boost in-store sales, ultimately fostering customer satisfaction and loyalty.
These days, consumers are on the hunt for personalized experiences. And as the retail marketplace grows more crowded, brands must ensure they forge personalized connections with customers in order to stand out among the competition. Clienteling enables store associates to create customized shopping experiences by accessing a 360-degree view of the shopper.
Clienteling also helps facilitate personal outreach after the customer leaves the store. For example, if a customer wants to mull over a potential purchase and leaves the store empty handed, the sales associate can later follow up via text or email to provide more information about that product – possibly with a discount code to cinch the sale.
By creating and storing profiles of your customers, containing their preferred sizes and styles, team members can access this information to cross-sell and upsell them products. Successful cross-selling and upselling demonstrates a deep understanding of the customer’s preferences and aspirations, fostering a sense of personalized service and strengthening the bond between the customer and the brand. As customers become more engaged with a brand, they are more likely to explore and purchase additional products or services, further increasing their lifetime value to the business.
Consumers will be much more likely to make purchases over the long term if they know they’ll receive their orders quickly. Retailers with omnichannel order management solutions in place can leverage various store fulfillment strategies, including buy online pickup in-store and ship from store, to get purchases in customers’ hands faster.
It’s critical that customers have a slew of order fulfillment options so they can select the one that best fits their schedules. For instance, some customers may want orders delivered directly to their doorsteps, while others may prefer to pick up purchases from a nearby brick-and-mortar location that same day, if their items are in stock.
Offering a variety of order fulfillment options is a key piece of brands’ customer retention strategies, especially as ecommerce behemoths like Amazon shift consumers’ expectations around rapid shipping.
By providing customers with flexible return policies, such as in-store returns, mail-in returns, or drop-off locations, brands can enhance the overall shopping experience and instill confidence in their customers. Offering multiple return options encourages customers to make purchases with the assurance that they can easily return or exchange items if needed, resulting in higher conversion rates and increased repeat purchases. Moreover, a hassle-free return experience can turn potentially negative situations into positive ones, fostering positive word-of-mouth referrals and customer advocacy.
One of the most effective methods of increasing CLV centers on offering a loyalty program. Loyalty programs fuel higher purchase volume by motivating members to participate and attempt to reach certain thresholds to unlock more incentives. These incentives can include earning points for each purchase – which can then be redeemed for discounts or free products – as well as participation-based perks, like collecting points for completing surveys about potential new items or submitting product reviews for the app and website.
Retail promotions are another way to target customers with exclusive deals. Retailers can cherry-pick the types of promotional discounts they believe will best resonate with their audiences. Some of these may include free shipping, percentage discounts (such as 20% off one full-priced item), buy one, get one deals, tiered promotions (which offer higher discounts to customers who buy more items, such as $30 off a purchase of $100 or more), and free gifts with purchase.
If shoppers know they can expect to receive retail promotions on a frequent basis, they will be much more likely to be a regular shopper.
If retailers can persuade customers to give up a portion of their smartphone’s real estate and download their mobile app, they can keep customers engaged by offering mobile-only perks. For example, if the brand offers app users free shipping on all orders, that serves as a major incentive to shop using the app.
It also helps drive more sales over a long period of time, as consumers will know they can make a purchase whenever they want, without worrying about shipping fees. Another mobile-only perk is exclusive content, such as videos from a celebrity spokesperson and surveys that let customers weigh in on styles for future products – all of which can make customers more invested in their relationship with the brand.
Referral programs harness the advocacy of existing customers to attract new ones. By incentivizing referrals through rewards or benefits, brands empower their satisfied customers to actively promote their brand within their social circles.
Integrating the referral program seamlessly across multiple touchpoints, including websites, mobile apps, and social media, ensures accessibility and convenience for customers. Ultimately, a well-executed referral program not only facilitates customer acquisition but also cultivates brand loyalty and drives sustainable growth.
Building a sense of community and fostering engagement among customers is essential for increasing CLV and cultivating long-term brand loyalty. One way to achieve this is by creating communities where customers can connect, share experiences, and interact with each other. These communities can take the form of social media groups, virtual or in-person events, or user-generated content platforms where customers can ask questions, provide feedback, and offer support to fellow community members.
These communities have different value adds. For example, encouraging user-generated content, such as customer reviews, testimonials, and product photos, serves as authentic social proof for prospective customers, while organizing offline events or meetups further strengthens the sense of community by providing opportunities for face-to-face interaction and relationship-building.
By facilitating these interactions, brands not only strengthen the bond between customers but also position themselves as trusted authorities within their niche. Furthermore, actively participating in these communities allows brands to gain valuable insights into customer preferences, pain points, and emerging trends, which can inform product development and marketing strategies.
By soliciting feedback from customers, brands gain valuable insights into their preferences, pain points, and expectations, allowing them to make informed decisions to better serve their audience. Actively seeking feedback also demonstrates a commitment to listening and responding to customer needs, fostering a sense of trust and engagement among customers. Additionally, leveraging customer feedback enables brands to tailor their marketing efforts and communication strategies, delivering more personalized and relevant experiences to their audience.
Ultimately, by incorporating feedback into their business practices, retail brands can drive sustained growth, strengthen customer relationships, and increase CLV over time.
By tailoring marketing messages and promotions to individual customer preferences, purchase history, and behavior, brands can create more relevant and engaging experiences that resonate with their audience. Personalized campaigns enable brands to deliver targeted offers and recommendations, increasing the average order value and overall CLV.
While measuring customer CLV is important for any retailer, it’s especially critical for those with a heavy focus on expanding and refining their omnichannel capabilities.
Improving customer lifetime value helps brands understand how and where their customers prefer to shop. If a brand discovers that many of its sales are stemming from its mobile site, that data should prompt a decision to invest in building a native app.
Ultimately, keeping a close eye on CLV can help inform retailers’ omnichannel strategies and make a notable impact on how they choose to foster long-term relationships with new and existing customers.
Interested in discovering how your brand can increase its customer lifetime value? Speak with one of our experts today.
