A study shows that increasing customer retention rates by 5% increase profits anywhere from 25% to 95%.
Repeat customers also bring in referrals and long-term value that helps grow your revenue/business at large.
Sadly enough, businesses pump most of their resources into consumer acquisition as opposed to retention even though it is way cheaper to retain existing customers.
This article will highlight 14 effective strategies to increase the customer lifetime value of your ecommerce store.
How to increase customer lifetime value in eCommerce
To increase your customer lifetime value and business revenue, here are 14 strategies you can implement to notch up consumer retention;
1) Give - before asking
The psychology behind this strategy is reciprocity. When you give someone something, they have a strong obligation to reciprocate that generosity. This is why customers choose to stay loyal to a brand after a discount or free sample.
The truth is everyone loves freebies and this is a great strategy to get loyalty amongst customers. You can offer a free sample or a unit of a similar product. And it works. An example is the 7/11 free Slurpee day which boosted their sales by 38%.
This is great for first-time customers - a sample or a unit of similar products can help convince customers to buy more. Sometimes even a simple note can leave a lasting impression and get them coming back for more.
A great example of how you can incorporate this into your ecommerce store is how chubbies shorts adds an extra item to each purchase.
2) SHOW your customers that you care about them
Customer information in this context means data you can use to run personalized campaigns. Now personalized campaigns don't just stop at behavioural triggers and using their first name in messaging, it’s going the extra mile with the information you have.
Before digging in further, you have to know that there is such a thing as over-personalization. So you shouldn’t go digging for information that is going to make your brand come off as creepy.
For instance, if you run a clothing gift shop that collects the recipient’s details, your customers do not want to see an email that says “Here’s a sock we think your friend Jerry is also going to like”.
The information we mean in this context could be customers’ regions for regional campaigns or something as simple as their first purchase date which is great for customer milestone campaigns. These types of campaigns show that you care about your customers and their achievements.
As a bonus, in your milestone campaigns, try to offer value in your messages.
In our example above, Fitbit links healthy tips to their customer birthday shout out. These tips offer value to their customers which in turn helps provide a good customer experience through engagement. In the long run, their customers will want to stick to their products not just because they remember birthdays, but because they offer value in this messaging.
3) 20% of customers drive 80% of revenue; Find the right segment
When you know who your valuable customers are, you can make pitches and implement behavioural upsell strategies that will improve your customer lifetime value. You can also track which strategy is working and which isn’t based on their reaction to your offers.
Now, how do you know who your most valuable customers are?
Use the RFM model approach. RFM stands for Recency, Frequency and Monetary. This model is great for figuring out your most valuable customers.
The RFM model is derived from the Pareto principle which implies that 80% of your business revenue comes from 20% of your customers. This model helps you figure out who that 20% of your customers are. Here’s how;
Recency answers when a customer purchased from you. This is because it’s the customers who made a purchase recently that are most likely to convert into loyal customers.
Frequency answers how often a customer makes a purchase. The more frequent a customer is, the higher chances they have of being loyal to your brand.
Finally, monetary answers how much a customer spends during a purchase. A customer who pays a lot to get your product will most likely stick to your product.
Merging all of this, calculating and using a scoring system, you can accurately determine your most valuable customers. When you discover who these customers are, make them the focus of your customer lifetime value campaigns. Start by implementing behaviour-based upsell strategies and encourage them to make high-value subscriptions.
4) Create memorable shopping experiences
When you optimize your website’s touchpoints, it improves your user experience. With a good user/shopping experience, your customers will be excited to return to your store. How do we know this? 88% of online shoppers said they wouldn’t return to a website after having a bad user experience.
Now while every store owner would argue that they offer a great user experience, it’s important to stay open-minded and continually find ways to optimize your site for a memorable user experience. And we mean the good kind.
You can start by looking through your website analytics to discover where the conversions on your store drop off the most. This will help identify areas where you need to pick up the slacks and optimize conversion.
Optimizing your conversion rate is important because it helps you get more value from your existing users and cut down on acquisition costs.
For an ecommerce store, the customer touchpoints you should focus on will be; add to cart, shopping completion rate, number of email signups etc.
You can improve user experience on your ecommerce store by;
- Improving your page speed to load faster than 3 seconds. No customer would want to spend a significant amount of time waiting for one item to load. They will most likely drop off. A faster page speed also makes it easy for customers to add items into their carts thereby reducing cart abandonment.
- Keeping your navigation in plain sight. Let the icons and labelled texts be displayed on a page. This way your customers can easily find their way around your store from the entry point to the checkout stage.
- Automatically apply discounts at the checkout as opposed to entering a code or scanning a coupon. Having to manually apply discount codes can be frustrating and time-consuming for your customers.
5) Use smart “bundles” - to increase Average Order Value
Now, this seems relatively easy to implement. However, you have to make sure you’re not pushy in your subscription pitch. When you are pushy, customers can see through and won’t trust you. And once you lose their trust, you’ve lost the sale as well.
In our example below, Choose Muse does a great job of upselling its subscriptions without being aggressive by creating bundles and adding discounts to make them more appealing.
What they do differently is adding a learn more button underneath each bundle to help customers fully understand what each package entails. This gives customers options to explore before coming to a decision. There’s no unnecessary timer or pop-up that pushes customers to buy immediately. What this shows is that they want their customers to make an informed decision.
With this, you’re subtly getting your customers to commit for at least a year, increasing their lifetime value as opposed to the regular monthly subscription.
6) Seek feedback, but don’t interrupt shoppers
Getting customer feedback about their user experience on your site or with your product can be exciting. Especially when you can’t wait to hear what they have to say. However, to increase their lifetime value, avoid intrusive feedback requests.
This means timing when to reach out for feedback. An example is sending a review pop-up when a customer visits your store after completing a successful purchase and receiving their order. It could also be a day after you help them resolve a pending issue or enquiry. This is a great way to follow up without being intrusive.
Also, in your follow-up message, it’s easier to have a rating question or a one-question survey. This way your customers don’t spend so much time answering your survey or find it exhausting. Structure it in a way that you still get a significant amount of data.
Here’s Massdrop’s rating question:
With the information obtained from your customer surveys, you can know what area of your store needs improvement and increase customer lifetime value by optimizing these areas.
7) Have faith in retargeting (it takes time)
The question now is; how do you do it right?
You’ve probably tried retargeting as a brand and the return on investment may have been low as well. Listen closely, to get retargeting right, you have to keep trying several messaging ideas and find which one works for you. If the first ROI was low, it simply means that your approach did not resonate with your target audience.
You can start with a discount like J.Crew in the image below. If this retargeting angle doesn’t work for your store, consider using another alternative like social proof. When social proof doesn’t work, try inspiring them with the story behind your products. For instance, if your products are made from recycled materials or eco-friendly materials, try that angle.
To get the best out of retargeting, you have to do it right. Here are a few tips;
- Test different variations of your ads first and pick the winning combination. As earlier stated, the key is to test. Start by testing copy variations. It will help you know what CTA works best, what words your customers like and how to use it for further retargeting campaigns
- Ensure your products resonate with your customers. At the end of the day, your ads will lose value if customers are not interested in the products you’re offering. So, understand the products your customers shop for, then use similar products to win them back.
- Switch up your ads every month. When a customer keeps seeing the same ad every day for more than a month, it loses its effectiveness. Consider switching up your ads at the end of a 30-day interval. It’ll keep your ads fresh and your audience interested.
8) Get creative with you post-purchase communication
Get creative. Beyond being clear and succinct, you can make the content of your messages funny, witty or if you can, add a little inspiration. That way, your customers are always excited to open up their emails or texts from you even after a purchase.
In our example below, MeUndies creates a persona for orders. So, it feels like your order is doing the talking. There’s also a witty Haiku which is a short poem that lets you feel like your order is desperate to find you. Then after that, you have the details of the shipping address and a tracking button to see items where they are in real-time.
Now, this is a type of post-purchase order that stands out.
In your post-purchase email, make sure to add a link to your return policy for customers who will be interested in returning an item. It says a lot about your brand transparency, stands you out from the pack and reinforces customers’ trust in your brand.
Also, let your messages be timely. For instance, you don’t want to send an order tracking message when the order has been delivered. So to send timely messages, automate them by creating workflows triggered based on customer behaviour.
9) Upsell, but ONLY based on their behavior (no cold emails)
Usually, you might be tempted to send cold emails or notifications to upsell your customers. And although upselling increases customer lifetime value, it is important to note that it works best when it’s behaviour-based upsells.
So studying customer behavioural patterns and creating actionable campaigns or making store adjustments based on the data gotten will significantly improve customer loyalty to your brand.
For instance, when a customer selects a wholesale deal, it can trigger a subscription offer for that same product/service. This is highly targeted because users who want wholesale packages will most likely subscribe for a monthly or annual order as opposed to customers who just want a single unit.
Amazon gets 35% of its sales from its recommendation engine which was designed to thoroughly understand behavioural patterns amongst shoppers.
So, when you gather data from your user research, create workflows that’ll be triggered by events a customer takes on your store.
10) Make your newsletters inspiring (go that extra mile)
60% of customers share their email address with online retailers to get promotional messages and deals.
You probably have a mailing list where you offer value through your promotional messages. However, for your messages to not get lost in a pile of hundreds of other promotional newsletters, make yours stand out. Make your emails conversational and offer exclusive deals to your list.
Here are a few tips you should consider when creating a good newsletter copy
- Always provide helpful information or details in your newsletters. It could be tips, deals, product guides or what attracted them to subscribe to your mailing list.
- The best way to make your emails conversational is by offering responses. Ask questions on what they want and let them reply to your emails. Through this, you’re building a community of loyal users who can trust you to prioritize their needs.
- Make your content easily digestible. And this means making it clear, free from jargon or technical terms.
- Never underestimate the power of a good design. No matter how great your content is, your customers are not going to be interested when the layout is disjointed and not appealing. People like good visuals. Use it to compliment your message.
So, start from the sign up offer that attracted them to your mailing list, segment your list and map out a drip campaign that leads up to an offer they would find interesting.
An ecommerce store that does this well is Storq. Being a mom store, they thrive on providing deals and helpful content through emails. An example is their black Friday deal email which infuses a bit of marketing, freebie and mom humour to make it engaging.
11) Build loyalty programs that go beyond just rewards (engage them)
68% of millennials say that they will not be loyal to a brand if it doesn’t have a good loyalty program. This goes to show that customer-friendly loyalty programs increase the average customer lifetime value.
The conventional loyalty programs in regular stores are usually disjointed and not exactly appealing. 33% of shoppers expressed a negative sentiment towards loyalty programs because of a lack of multi-channel seamless experience while 44% said it was because of a lack of relevance and value. So even though loyalty program memberships increase, customers don’t actively participate and this is because many programs fail to engage their customers.
These loyalty programs usually start with a rushed pitch that always sounds scripted, crammed into a tiny section of a page or in a pop-up. Hence, it lacks the engagement that will get you the results you desire. Try using games in your loyalty programs to boost customer engagement.
Here’s an example of a poorly designed loyalty program:
Although this is designed to be an infographic on a landing page that explains the details of the program, it’s clear that this design failed to convey that. It would take a lot of time to decode the task required, points system and what the actual rewards are. No customer is going to want to spend time comprehending this.
The common approach to loyalty programs also rarely cover the details and perks of becoming a member. What you should do is create an entirely separate page where you can convey your loyalty rewards succinctly.
Focus on the benefits of your program before asking them to carry out certain actions. Make sure to communicate how they can redeem their accumulated rewards.
A good example is the Mud Love loyalty page where they highlight every detail of their loyalty program. It is easier to comprehend what they mean and even easier to join in. See a snapshot of the page below.
12) Give them reasons to buy from you again
89% of customers will likely come back after a good sales service or support. So after their purchase, it is imperative to follow up and be proactive with their enquiries or requests.
Offer 24/7 on-call support or support across several channels so your customers can reach out if there was a mix-up or need for a return. You can add a link to your FAQ page or resources page. It goes to show that your help centre is readily available.
For complex products or high maintenance products, you can offer a guide on how to use or maintain the purchased items.
If there’s a delay with delivery or shipping, you should quickly communicate it with them using a notification email or SMS. For example, here’s an email from retail store Jumia on a rescheduled delivery
Another great after-sale service you can introduce is by highlighting or if you can, extend the warranty period attached to their purchase.
13) Have faith in coalition programs (test until you find a fit)
Many brands come together to work on a partnership. Together, this partnership benefits the brands involved and helps reinforce this sense of and loyalty to existing users.
Now after several partnerships, you might discover that the results are not particularly favourable. And while you might consider abandoning coalition programs as a whole, you just have to find the right fit.
The key to finding the right fit when it comes to these kinds of partnerships is — to keep trying coalition programs until you find the right one.
When you find the right partner, your product or service automatically sells itself. The results will be worth the time you spent trying out partners.
Here’s an example of a coalition program that worked perfectly, earned a lot of revenue and acquired new customers.
In this 2018 Spotify and Hulu partnership, customers got a $5 save when they paid for this bundle as opposed to paying for it separately. This type of partnership can be incorporated into your ecommerce store.
Before this, Spotify had partnered with Sony, WYNC studios, Waze, Microsoft amongst others. So don’t stop at the first or second partnership you make. Just keep trying coalition programs, find the right one and keep finding other right programs.
Another great example is the Dolly + Crate and Barrell partnership. Crate and Barrell is a retail outlet that sells all furniture like tables, sofas, beds but to mention a few. They needed to clear out first quality discontinued items and stock with blemishes.
What they did, in this case, was a partner with Dolly- an app for delivering and moving furniture. Together they were able to sell products and offer delivery for all heavy furniture. So they provided the product, solution and a holistic customer experience for their customers.
Now after the success of the examples above, these stores did not stop because they found one good program. Till today, they keep trying out other partnerships with similar and dissimilar brands. Because that’s what coalition programs are about.
So partner up with another ecommerce store and bundle complementing products together. Run this campaign on both ends, then monitor the results to know what gained traction and what didn’t. The key is to test and test again, then let the data guide you. After the testing period, you’ll know exactly what works.
14) Give them a legit excuse to shop more
Nearly all ecommerce stores would implement a free shipping campaign. And this is justified because 90% of consumers would shop online more often if given the option of free shipping. However, to increase your customer lifetime value, consider pitching your free shipping differently.
You can tie this shipping to an amount spent on your site. For example, you could offer free shipping for orders above $200. When a customer wants to buy products worth less than that, you could add a reminder saying only $xx to go for free shipping. This way you can bump up sales from a customer and ultimately, the LTV.
Your customers need to feel appreciated and valued before they become loyal to you. The more they stay loyal to your business, the more your revenue grows. So show them how much they mean to your business by offering quality service, tracking how satisfied they are with your product/service and occasionally, offer them a discount or freebie.
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