Are you tracking your business’s success in the correct way? If the answer is yes, then perhaps you must know about the customer’s lifetime value.
As a Shopify store owner, it is your duty to track down the revenue, profit, cash flow, AOV, and CLV of your business. Customer lifetime value actually defines how long a customer maintains a good relationship with your business.
Customer lifetime value is a predictive metric since it predicts how much money a customer will be worth to a business in the future while the connection is still active.
Even before acquiring a customer, some businesses utilize the method to anticipate CLV in order to determine if the acquisition expenditures are justified. The second stage is to establish the time frame over which the data will be analyzed and the frequency with which it will be updated.
Knowing about measuring CLV could be a nice initiative, but do you know? How do I increase it? In this article, we will discuss how to increase customer lifetime value at Shopify
How do you Define Customer Lifetime Value?
eCommerce customer lifetime value (CLV, LTV, or CLTV) reflects the total revenue generated from a single client over the course of their whole relationship with your company. Customer loyalty and contentment are at the heart of CLV.
Therefore, retaining and expanding your base of existing clients is a key component of sustainable business expansion. A customer’s lifetime value to your company increases with the length of time they remain a loyal customer.
Why is CLV Important To Your Business Growth?
For an eCommerce business, CLV is important because it improves the customer relationship with a particular company. In an eCommerce business, grabbing customers’ attention for a long time is quite tough, so if you do not offer something extra to your customers, they will not sustain.
Moreover, to ensure permanent brand visibility and make effective marketing decisions, CLV helps businesses. With the help of a customer’s CLV duration, a brand or shop can predict what type of modification a business needs.
If you are a storeowner at Shopify and want to thrive in your business, then focusing on CLV is very crucial. Here are some reasons why CLV is important for an eCommerce business: Look at the infographic:
What’s the Formula for Measuring Customer Lifetime Value?
Customer lifetime value is derived by summing the average order value, the frequency of purchases, and the value of each customer throughout a company relationship.
Average order value
The average order value measures how much money a consumer spends while purchasing. Simply divide your entire revenue by the number of orders to achieve this figure. Shopify merchants can see this data by viewing their monthly sales reports in the Reports area of their Admin. To do this, simply divide your annual revenues by your order total.
Average Order Value = Total Sales / Order Count
Purchase frequency
The average number of times customers place an order measures how often they shop. To determine the number of clients you had during that time period, you would divide the total number of orders by the number of customers you had. Your frequency of purchases will increase as a result. This information is also available to Shopify store owners in the Reports section under Sales by Customer.
Purchase Frequency = Total Orders / Total Customers
Importance to Customers
The term “customer value” refers to the average amount of money each client is worth to your company over a given time period. Add your average order value to your buy frequency to get your customer value.
Customer Value = Average Order Value x Purchase Frequency
How to Increase Customer Lifetime Value at Shopify?
- Take Reviews From Your Customers
- Try To Focus on Up-selling And Cross-Selling
- Make Use Of a Referral Programme
- Sending Customized Messages and Emails
- Try To Provide Top-Notch Customer Service
- Show Appreciation for Loyal Customers
- Use Third-Party Applications
Way 1: Take Reviews From Your Customers
Customers are valuable to a business and are more likely to stay loyal if they feel appreciated. If you want satisfied customers, you need to know what motivates them. Customers will only provide feedback once you specifically ask for it.
Customer feedback can be collected in various ways, including through surveys, one-on-one conversations, and providing informative and engaging material. Use every interaction as a chance to gather customers’ opinions. Read this to learn how to collect reviews from customers.
PowerReviews predicts that in 2021, 99.9%+ of consumers would check reviews before making an online purchase.
When you are going to ask for a review, try to note all the points that are brought up, and you can start working on those data points to bring success to your business. You may improve your product or service by solving the complaints or requirements raised by your customers.
Though these are small initiatives, they mean a lot for a business and customer satisfaction. These things make customers happy and convert them into loyal ones. And when a customer stays with a business for a long time, it boosts the CLV.
Way 2: Try To Focus on Up-selling And Cross-Selling
Cross-selling and up-selling are two of the most effective sales strategies that are applied worldwide. With cross-selling and up-selling, you can encourage your customers to spend more on your business.
Upsell support allows you to buy more expensive products than usual. On the other hand, cross-selling offers to buy a supplementary product. When a company initially offers to upsell or cross-sell, a customer thinks it is an offer, and in such a way, businesses start to trust the particular business.
According to a poll of over 500 sales professionals conducted by the HubSpot Blog in 2022, upselling generates up to 30% of revenue, and cross-selling generates up to 74% of revenue for 74%.
When a customer starts trusting a brand, they become loyal customers. This technique will work as a customer retention technique. When a customer is actually retained, it has an impact on the customer’s lifetime value.
So, in the long run, customer lifetime value (CLV) and bottom line will increase if your business offers a quality product with upsell and cross-sell techniques.
Way 3: Make Use of a Referral Programme
Boosting CLV through a referral program is highly effective. The lifetime value of referred clients is 16% higher than that of a usual customer. In addition, 55% of people will post their recent purchases on social media after hearing positive feedback from friends and family. The same survey shows that 81% of people trust personal recommendations.
Annex Cloud claims that you can increase your earnings by 25% because of referrals. An 18% increase in client loyalty can be expected from a referral compared to a non-referral source. A referral program can increase CLV by exposing your business to new potential clients who may eventually become loyal customers.
Way 4: Sending Customized Messages and Emails
Email marketing is the preferred customer retention method for 56 percent of digital marketers. Many companies, however, need to catch up to their promises of valuable content delivery. They don’t offer anything of actual value to their readers and instead rely on automated campaigns.
According to sender.net, 90% of marketers say that individualised customer experiences increase revenue.
By sending out customized and targeted ads, you attract the attention of your ideal clients and keep them interested in your brand’s offerings. Verify Verfacto’s AI-recommended personalization for subsets of your consumer base.
Way 5: Try to Provide Top-Notch Customer Service
Customers are more likely to remain loyal, and their lifetime value increases when they get excellent service. 66% of consumers use at least three communication channels to contact assistance while buying something. In such cases, ensure your organisation is engaged across several social media platforms so that customers are satisfied.
If your business has several channels for communication with your customers, then fix which channels your customers like and invest more heavily in them.
For example, live chat assistance is great since customers want answers to their inquiries, requests, and concerns immediately. This actually depends on which app you integrate into your live chat. You can use a bot to do that.
But if you need more resources to reply to your customers promptly, you can create a customer service team to reply to customers as quickly as possible. Research shows that 84% of customers who post comments on social media want a response within 24 hours.
Way 6: Show Appreciation for Loyal Customers
To increase a customer’s lifetime value, making a list of loyal customers and sending rewards to them is a winning strategy. If you appreciate your customers, then they will appreciate your business.
There are different ways to show appreciation to customers. For example-
- Sending thank-you emails
- Social Media Share
- Arranging loyalty programmes
- Offering free shipping
- Special Holiday Deals
Saying thank you to your loyal customers is a great way to increase CLV. Because a simple thank you can make your customer feel special. If you do not know how to say thank you to your loyal customers, then read this.
On the other hand, featuring your loyal customer’s picture on social media can attract him to your business. Arranging loyalty programmes, offering free shipping, and offering holiday discounts like Christmas, New Year’s, or BFCM
Way 7: Use Third-Party Applications
Shopify has a bunch of business-centric apps available for different types of businesses. According to your business type, you can use any of the apps you find fit for your business.
If you are really puzzled about this matter, then let us help you. First of all, I’ll give you a brief introduction at the beginning. For example, you have a Shopify store where you sell products in bulk to B2B wholesalers.
Now you can find an application that will help your customers place bulk orders easily. Not only bulk order, get an app that will also help you perform different bulk order activities such as making bundles and putting restrictions on products, for example, MOQ.
Let’s take a look at one bulk order app that can increase your customers CLV.
Here, we can see a Shopify B2B wholesaler who sells juices in different variants with a bulk order app for Shopify. His customers can buy 25 juices at a time from different flavors. If the customer chooses less than 25, then the store will not let him add to the cart.
These types of bulk order apps are really helpful for a B2B wholesale business because these apps not only allow bulk orders but also provide different perks regarding wholesale business. Which ultimately increases the CLV of your Shopify customers.
Bottom Line
Customer Life time value could be an important aspect of your eCommerce business. Especially, if you are a businessman at Shopify. Read this article thoroughly and implement our mentioned aspects to boom your customers’ life time value.
