Customer Lifetime Value (CLV) is one of the most crucial metrics for building a thriving business that grows sustainably over time. Surprisingly, most store owners focus heavily on acquiring new customers, often overlooking the value of retaining existing ones. This is a huge missed opportunity! By understanding how to increase customer lifetime value, you can foster loyalty, boost revenue, and build a sustainable brand.
We’re here to help. In this comprehensive guide, we’ll discuss what CLV is, how it can help your business, and what actionable steps you can take today to maximize customer retention. Interesting, right?
Let’s get right into it!
What Is Customer Lifetime Value?
Customer Lifetime Value (CLV) measures the total revenue a customer spends throughout their relationship with your business. Unlike a one-time purchase, It takes into account the value of all the transactions made over time, giving you a clear picture of how much a customer is worth to your brand.
CLV highlights the long-term value of every shopper and why it’s crucial to keep them engaged beyond the first sale. It also helps you allocate resources wisely. Instead of constantly chasing new customers (which costs more), you can focus on building lasting loyalty and maximize the value of your best customers.
How to calculate CLV
Here’s a simple formula you can use to calculate CLV:
To illustrate further, let’s apply this formula to a simple example.
Let’s say one of your customers spends an average of $40 per order, purchases 4 times a year, and remains with your brand for 6 years… Using this formula, their CLV would be:
40 x 4 x 6 = 960
This means that, on average, this customer contributes $960 to your business over time.
In the next section, let’s look into why you should keep an eye on this metric.
Why Is CLV Important For Your Business?
CLV is an important indicator for long-term business success. It gives you valuable insights on how well you retain and engage customers. Let’s explore why this matters:
Boosts profitability without acquiring new customers
This is likely not news to you, but it’s an important reminder: Acquiring new customers can be up to seven times more costly than retaining existing ones. It doesn’t stop there though.
Focusing your efforts on nurturing your best customers not only helps you save money–it can also boost profitability! Studies reveal that loyal customers spend 67% more than new ones, meaning they bring in higher revenue with less cost.
By increasing your store’s CLV, you’re making the most of every customer relationship, encouraging them to choose your brand over competitors. The result is better profitability and stronger brand loyalty, which brings us to our next point!
Drives sustainable business growth
When shoppers consistently return to your store, engage with your brand, and make repeat purchases, they contribute a more predictable stream of revenue. This allows your business to grow and stay resilient even during market fluctuations.
What’s more, loyal customers are your best brand advocates. They’re more inclined to leave reviews, share their experience with your brand, and recommend your store to others. All of these drive growth without the additional marketing costs.
Enhances the overall customer experience
Keeping an eye on CLV is essentially about giving customers more reasons to stay. In the quest for this, you naturally improve key touchpoints in the customer journey. You’ll invest in tools that will help you offer better service, personalized incentives, and a seamless checkout experience.
The result? An engaging, frictionless shopping experience that keeps customers coming back. In today’s marketplace where shoppers have a ton of options, this is what can truly set your brand apart.
How To Increase Customer Lifetime Value (6 Effective Ways)
Now that we understand CLV and why it’s important for your business, it’s time to dive into the most exciting part: learning how to increase customer lifetime value! The key is keeping your customers engaged and giving them reasons to return.
In this section, we’ll walk you through effective strategies to help you do that!
1. Launch a loyalty program
Our first strategy is a power move for every business. Shoppers love feeling valued and appreciated and by launching a loyalty program, you can reward customers for their engagement with your brand and give them incentives to return. In fact, over 83% of today’s shoppers say that belonging to a loyalty program influences their decision to buy again from a business.
With the right tools, setting this up is easy and straightforward. WooCommerce store owners, for instance, can use Advanced Coupons’ Loyalty Program to quickly launch a points-based loyalty rewards system. With this tool, you can reward shopper actions like signing up, buying products, or leaving reviews.
Implementing a loyalty program increases customer lifetime value by encouraging customers to return, knowing they’re earning points or perks every time they shop.
2. Leverage store credits to keep customers coming back
Store credits are a versatile tool you can use to improve the shopping experience and encourage customers to come back. Think of them as a “virtual balance” shoppers can use toward future purchases in your store. There are several ways you can incorporate them into your strategy. For instance, you can:
- Issue store credits instead of refunds: Cash refunds can be more complicated to process, depending on the payment method used. Offering store credit is simpler, faster, and keeps the money circulating within your business
- Offer store credits as compensation: If a customer experiences an order delay, a product mix-up, or a minor inconvenience, issuing store credit as a goodwill gesture can help turn a negative experience into a positive one.
- Use store credit as a promotional incentive: You can also offer store credits as an additional incentive during sales or special promotions.
💡WooCommerce store owners can use Advanced Coupons to easily offer store credits to customers. This powerful plugin extends WooCommerce’s default coupon functionality and allows you to grant store credit effortlessly—whether as a reward, refund alternative, or promotional incentive.
3. Offer personalized discounts
According to an industry survey, 83% of customers are interested in personalized promotions, yet only 44% receive offers relevant to their preferences. This is a missed opportunity and a chance to differentiate your business from the rest.
By offering personalized discounts, you create a sense of exclusivity that makes shoppers feel seen and understood. Instead of launching generic promotions, you can use the data you already have to craft offers tailored to your customer’s shopping habits, purchase history, and preferences.
For instance, you can use sales data to identify the top products or product categories that customers frequently purchase. With this insight, you can:
- Offer targeted discounts on complementary products or categories based on past purchases
- Reward VIP customers with special discounts based on their spending milestones
- Send personalized coupon codes to customers who haven’t shopped in a while to re-engage them
🎯 With tools like Advanced Coupons, crafting tailored promotions is a breeze. This WooCommerce plugin allows you to set up discounts for specific products, categories, attributes, customer roles and so much more! Learn more here.
4. Customize your marketing messages
We can’t overlook the importance of marketing when discussing how to increase customer lifetime value. It’s an extension of the power of personalization: today’s fast-growing companies drive 40% of their revenue from personalization compared to average players! Customizing your marketing messages is one way to leverage personalization and a create a more engaging and customer-centric experience.
Start by segmenting your audience to deliver the most relevant offers. For instance, you can segment your email list based on customer type (wholesale buyers vs regular customers) or purchase history. This can guide your email marketing efforts, ensuring you send out relevant offers to different types of customers.
You can also leverage retargeting ads to bring shoppers back. These types of campaigns allow you to display personalized advertisements to customers who have:
- Added items to their cart but abandoned them
- Made a purchase but haven’t returned in a while
- Browed specific products in your store
It’s a smart way to re-engage customers and keep your brand top of mind. Remember: when customers receive messages that match their interests, they feel more connected to your brand, making them more likely to engage and stay loyal.
5. Provide stellar customer service
86% of today’s shoppers are willing to pay a premium for better customer service. On the flip side, 76% of shoppers will leave a brand after a single bad experience! These numbers speak volumes: customer service is a crucial factor in customer satisfaction and making them stay.
If your online store consistently delivers a smooth shopping experience, customers will keep coming back, increasing your customer lifetime value (CLV). To start, make sure that your online store is easy to understand and navigate. Make it easy for customers to browse products, find information, and complete an order.
For instance, if you serve bulk buyers, you can provide a bulk order form that makes it easy for them to place wholesale orders. With plugins like Wholesale Order Form, this is easy and seamless to set up:
Of course, it’s also crucial to provide quick and effective responses. You can leverage AI chatbots or live chat to provide quicker responses to customer questions. Providing a dedicated knowledge base or FAQ section can also empower your shoppers and reduce support tickets.
6. Listen to your customers
When talking about how to increase customer lifetime value, we can’t miss the importance of customer feedback. Customers who feel heard and valued are more likely to trust your brand, stay loyal, and continue buying from you. It doesn’t stop at asking for feedback–it’s also about making improvements that improve their experience.
Keep an eye on any recurring themes mentioned in product reviews, social media mentions, and tickets to understand what customers love (and what frustrates them). You can leverage AI tools like StoreAgent to quickly summarize product reviews, making it easier for shoppers (and you) to make informed decisions.
Gathering direct feedback through surveys and post-purchase emails can also help you pinpoint areas for improvement. If you’re curious about the creative ways you can gather customer feedback, then check out this guide!
Conclusion
Understanding how to increase customer lifetime value is important if you want to build a thriving and sustainable business. This crucial metric gives you valuable insights into customer retention and purchase behavior. In this comprehensive guide, we explored what CLV is, why it matters, and six high-impact strategies to improve it:
- Launch a loyalty program to reward repeat customers
- Leverage store credit to keep shoppers coming back
- Offer personalized discounts to make customers feel valued
- Customize your marketing messages to boost engagement
- Provide a stellar customer experience to build trust and loyalty
- Listen to your customers and adapt based on their feedback
Investing in the right tools can help you improve the shopping experience and encourage customers to keep choosing your brand. Plugins like Advanced Coupons allow you to craft highly personalized discounts that resonate, launch a loyalty program, and offer store credit.
Do you have any questions about how to increase customer lifetime value? Let us know in the comments!
