Customer Lifetime Value: Proven Ways To Increase Your Returning Customer Rate

Getting a flow of new customers to your store is fundamental to your success and you’ll need a solid customer acquisition strategy in place for that to happen. But to achieve long-term business success, your customers will need to come back and purchase again. In other words, you need to work on your customer lifetime value.

Your customers need a good reason to come back. As an ecommerce store owner, it’s your job to make it an easy decision. You do that by providing a great customer experience the first time around.

A great experience will be accompanied by a set of positive emotions. And if you feel good about something, it’s human nature to want to experience the same thing again.

Making more money off of your existing customers is usually MUCH cheaper and easier than acquiring more of them. Drew Sanocki

In this article:

Before you start

• A Huge Opportunity
• CLV Success Metrics
• Give Your Customers a Reason to Come Back

7 proven ways to increase customer lifetime value

1. Drive Revenue with Thank You Emails
2. Build Excitement with Fulfilled Order emails
3. Customer Survey Emails
4. Bounce Back Vouchers
5. Win Back Emails
6. Sunset Disengaged Subscribers
7. Setup a Loyalty Program

A Huge Opportunity

In ecommerce, you’ll find the pareto principle at play again and again. Customer retention doesn’t quite follow the 80/20 rule, but according to a study by Adobe Analytics you’ll find that approximately 40% of your revenue comes from just 8% of your customers. That’s wild when you think about it. The vast majority of your customers are likely to be one-time purchasers.

This creates a huge opportunity.

Looking beyond sales and revenue to customer lifetime value (CLV) can help you truly understand how much your customers are really worth.

When you understand who your best customers are, you can focus your marketing efforts on acquiring more of those customers.

The beauty of focusing on customer lifetime value is that you can achieve significant growth in very little time. And the growth comes without you having to spend any more on traffic.

Measure the success of your Customer Lifetime Value campaigns

Firstly, we need to know what we are trying to achieve and what success looks like.

There are a few metrics that are key and that are worthwhile keeping track of to determine how each initiative is working.

Percent Returning Customers (PRC) – How many of your customers return to purchase from you again? Returning customers will ultimately drive long-term business success.

Time to 2nd Purchase (T2P) – How long does it take for a customer to come back to make a 2nd purchase? In fact Adobe claims that in the United States 40% of an eCommerce store’s revenue comes from 8% of it’s customers.

Customer Lifetime Value (CLV) – How much on average does a customer spend with you over a 12-24 month period of time? This is considered really one of the most important metrics in eCommerce.

Allowable Acquisition Cost (AAC) – Armed with above data how much can you spend on acquiring a new customer? Josh Kaufman in his book “The Personal MBA” explains why awareness of this metric is critical for your business. Compare your AAC vs your actual Customer Acquisition Cost (CAC) to track the performance of your marketing efforts.

Give your customers a reason to come back to your store

Before we get started put yourself in your customers’ shoes.

You’ve just clicked “confirm order” and bought that new widget you’ve been saving up for. Emotions are running high and you’re excited to hear updates on the pending delivery.

Now put your business-owner shoes back on.

This is your moment to stamp a truly positive experience of your business in the heart and mind of your customer.

Build excitement, calm fears and heighten expectation.

Provide such a great experience that they’ll be eager to come back come back.

1. Drive revenue with Thank You emails

The “Thank You” email is the one you get immediately after a purchase.

And they get CRAZY high engagement.

Email campaign success can be measured with open rates and click through rates. According to Klaviyo Thank You emails get 352% higher open rates and 329% higher click through rates than standard campaign emails.

This is because people are anticipating these emails and are eager to get an update on their order.

An easy way to get started is by offering your new customers a time-sensitive deal on a product related to what they ordered.

Klaviyo have lots more ideas on their blog about how to increase revenue with post purchase emails.

2. Build Excitement with Fulfilled Order emails

Remember how we mentioned that customers go through a series of emotions?

Here’s your chance to tap into a powerful one – expectation.

When we make a purchase we want to be re-assured that we made a good decision.

After you mark an order as ‘fulfilled’ setup an automated email that not only informs of pending delivery but builds the expectation of the product.

Put simply –> Send them an email with reviews or testimonies from other customers who bought the same product.

This will reassure them and get them excited for the product.

Excitement helps experiences stick in your mind.

Remember – Our job is to build excitement, calm fears and heighten expectation.

3. Customer Survey Emails

Honest customer feedback is truly worth it’s weight in gold.

It helps us improve our products and services to further increase our Customer’s Lifetime Value.

Jilt.com wrote a comprehensive articles on Customer Surveys on how best to select actionable questions and structure the survey to get the most actionable insights from each participant.

Simple create a new flow or add an email to an existing flow that directs the customer to your Survey Form.

There are lots of tools available to create surveys, including Google Forms (free) and SurveyMonkey (paid).

Regardless of which service you use, make sure that the information that you will receive will be actionable and help you provide more value to your customers.

4. Bounce-Back Vouchers

These could be used in 2 different ways; either as an on-going incentive or as a time-limited campaign.

The concept is that when a customer makes a purchase you send them a unique discount code of their next purchase.

The “Flows” functionality in Klaviyo make this very easy. Create a Flow that says once a customer’s order has been fulfilled then send an email sequence.

It’s important to note that the type and level of discount that works best will be determined primarily by your business.

Remember –Generally speaking, offering a discount to get a customer back will always be more profitable than by getting a new customer.

5. Win Back Email Series

The goal of Win-Back Series is to make sure your customers don’t lapse. This is a crucial part of your objective to increase your Customer’s Lifetime Value (CLV).

Before we get started there’s a few pieces of data you need to pull together:

1. Time to 2nd Purchase (T2P) – On average how long does it take for a customer to come back to make a 2nd purchase?
2. What is the longest T2P in your database?

This helps us in 2 ways:

1. We know approximately when to expect a repeat purchase.
2. We know that the chance of a repeat purchase drastically reduces after a customer exceeds the longest T2P.

Now the Win Back action plan:

Setup 2 automated segments in your customer database

1. Segment #1 – Last purchase date was between the Average T2P and the Longest T2P. For example “Last Purchase Date between 30-45 days ago”
2. Segment #2 – Last purchase date was greater than the Longest T2P

Remeber to connect these both as Facebook Custom Audiences.

Create an email sequence for Segment #1 asking how they’re getting on, would they a ‘top-up’ of their product.

Transition this into discount codes, increasing as time goes by.

If and when the customer enters into Segment #2 we know that the chance of them buying again is becoming smaller and smaller.

Now’s the time to hit them with the biggest discount you can afford.

Read “The Anatomy of the Perfect Win-Back campaign” for details on how to correctly segment and roll this out.

Setting up a Win Back Series requires a little bit of time and effort, but re-engaging an existing customer is a lot cheaper than acquiring a new customer.

6. Sunset Disengaged Subscribers

It’s really important to keep your email database clean and maintained and this flow directly follows your Win-Back Series.

You’ll receive clearer feedback on what works for your subscribers, increase deliverability and save you money if you pay by amount of subscribers.

The headline is – don’t keep people on your list if they have shown zero interest in your brand.

Klaviyo has written a great article on how to correctly implement a Sunset campaign.

If people have failed to engage in your Win-Back Series or haven’t interacted with any email it’s time to add them to our Sunset Series

Create a Segment for people who haven’t opened or clicked the last 10 emails they’ve recieved.

You can include catchy titles such as We Miss You that progress to “Your Account Will Be Removed”.

And if it gets to this point remove or archive them.

7. Set Up a Loyalty Program

We’re big fans of Yotpo’s loyalty program. Yotpo bundles loyalty and referrals in one package

Their headline on their “Customer Loyalty Playbook” is:

“In the next era of ecommerce, you have two options: lose your hard-earned customers to the competition, or invest in building a brand that customers truly love.”

Couldn’t have put it better ourselves!

Think of loyalty as the points you get at the supermarket when you make a purchase. When you have enough you can trade them in for discounts on food / petrol etc

ecommerce loyalty is the same except that it allows you to engage with your customers in a multitude of different

Yotpo’s “Customer Loyalty Playbook” really does a good job so dig into the guide and see what can be done to increase their engagement with your brand.

Conclusion

The first sale is only start of a beautiful relationship. And, just like on a first date, if you wine and dine your customers in style, there’s a good chance you’ll meet up again.

Your job is to deliver exceptional customer service and convince your customers to come back for more. Use the strategies above to make that happen and increase your average customer lifetime value.

After all, it costs five times less to keep existing customers than to acquire new ones, which is money you can spend instead on launching new products and growing your business.