customer lifetime value in e-commerce

How to Boost Customer Lifetime Value (LTV) with Superb Customer Experiences 

If you run an e-commerce brand, you’re familiar with the pain of high customer acquisition costs (CAC). These usually involve the costs of advertising, marketing, and brand-building which brands must incur to be visible and discoverable to customers and engage them. For any B2C or D2C e-commerce business, Customer Lifetime Value (LTV) is a key growth metric to track; the higher the figure, the better it can justify the customer acquisition cost. The concept of LTV, the projected revenue that a customer will generate over the entire course of their relationship with a company, has become increasingly important in today’s competitive marketplace. 

In this blog post, we will explore the different strategies and tactics that can be employed to deliver exceptional customer experiences, thereby boosting LTV and fuelling sustained growth for your business. So, keep reading to know more.  

What is customer lifetime value in e-commerce? 

In the context of e-commerce, Customer Lifetime Value (LTV) is a crucial metric that represents the total projected revenue a business can expect to generate from a customer over the entire course of their relationship. LTV is calculated by considering factors such as the average purchase value, purchase frequency, and average customer lifespan. 

Understanding LTV in e-commerce is vital as it helps businesses make informed decisions about customer acquisition, retention, and marketing strategies. A higher LTV implies that customers are more valuable over time, providing businesses with an opportunity to invest in acquiring and retaining high-value customers. 

By focusing on increasing LTV in e-commerce, businesses can allocate their resources more efficiently, target the right customer segments, and create personalised marketing campaigns to enhance customer experiences. Ultimately, a strong emphasis on LTV helps e-commerce businesses build long-term, profitable relationships with their customers, driving sustainable growth and profitability. 

How does quality customer experience help increase the customer lifetime value in e-commerce? 

The secret to customer retention is providing great experiences. If you deliver a superior customer experience across all touchpoints and interact with them to understand what their experience is, the chances of them buying more from you will be higher. 

We all know that the customer experience helps to improve customer lifetime value. But how should you go about improving the customer experience

1. Understanding customer needs and preferences 

This is the first step. How can you improve customer experience, after all, if you don’t know what your customers need? 

There is no one size fits all solution in this case — you have to listen to what your customers are saying to figure out what the benchmark is in your specific industry. For instance, are other brands offering a robust after-sales policy? Are other brands offering a try-and-buy facility? 

You need to make sure that you optimise the customer experience by incorporating the market standards. 

2. Providing personalised experiences 

This is one of the best ways to boost customer lifetime value in e-commerce.  

Personalisation is when you tailor the shopping experience to fit each customer’s unique preferences and needs. You can use customer data such as purchase history, search history, and demographics to provide relevant product recommendations, customised promotions, and personalised content. 

This will help you realise the importance of customer lifetime value. 

3. Fostering customer engagement and loyalty 

This is one of the biggest disadvantages of e-commerce — because you don’t get to interact with your customers directly, it is difficult to create personal connections. One way to do this virtually is through social media.  

You can engage your customers on social media by involving them with your brand through user-generated such as reviews, testimonials, reposts on social media, giveaways, and more. Listen to feedback and try to solve all problems, no matter how small. 

4. Delivering exceptional customer service 

Excellent customer service involves responding to questions and complaints quickly, efficiently, and with empathy. You need to make your customers feel cared for and imbibe the vibe of interacting with a salesperson on your website. 

One way to achieve this is by offering multiple channels for customer support such as email, phone, and live chat. You can also use chatbots and AI-powered customer service tools to provide 24/7 support and provide information to customers during non-business hours or enable them to request a call-back.  

Best practices for boosting customer lifetime value in e-commerce 

The importance of customer lifetime value is undeniable. But how can you effectively boost it in your own business? 

You can consider some of these best practices. 

1. Implementing a customer-centric approach 

If you’re running an e-commerce brand, your entire business is centred around customers. It is very easy to forget that, especially when you’re focused on product development. Luckily, there are various platforms that automate the order fulfilment process and allow you to incorporate AI chatbots to make your approach more customer centric. 

2. Offering rewards and incentives 

Loyalty programs go a long way to bringing customers back and retaining them.  

The one thing that we all love is a good discount. By offering incentives, such as discounts, free shipping, and exclusive access to sales and promotions, you can encourage customers to make repeat purchases and increase their overall lifetime value. 

For instance, you can offer reward points on purchases that can be redeemed on future purchases. Many brands also offer exclusive membership discounts that can be added on top of any store-wide discount. 

3. Gaining customer feedback and making improvements 

Your feedback loop has to be dynamic. You need to assimilate the feedback and improve your product on a continual basis. 

This includes collecting feedback, analysing customer behaviour, and using data-driven insights to optimise the customer journey. E-commerce businesses can use tools like A/B testing, customer surveys, and analytics to identify areas for improvement and implement changes on their digital touchpoints such as their brand website or application to further enhance the customer experience. 

4. Building strong relationships with customers 

This is a very difficult task, especially in the case of an e-commerce brand. How can you build strong relationships with your customers if you never meet them and when there is so much competition in the market.  

The trick to doing this is to make your customers feel like your website has been personalised for them. Offer custom recommendations and reminders. Send product suggestions through periodic emails and engage them on social media. 

The importance of customer lifetime value in the growth and optimisation of e-commerce operations is huge. Focussing on this will help you grow your business in a sustained manner and scale up easily. Using an end-to-end e-commerce management platform like Ordazzle will help you to streamline your operations and deliver experiences that delight and bring customers to your brand again and again.