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What is Customer Lifetime Value (CLV)?

Outlining Customer Lifetime Value (CLV), a crucial eCommerce metric measuring the total revenue a business can expect from a single customer, highlighting its importance for profitability, customer retention, and sales strategies.

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Table of Contents

  • What is Customer Lifetime Value (CLV)?
  • Why Is Customer Lifetime Value Important in E-Commerce?
  • How Can Customer Lifetime Value Be Increased?
  • Conclusion

What is Customer Lifetime Value (CLV)?

You must track a variety of e-commerce indicators, including refund rate, conversion rate, average order value, and more. But what if you could use a simple metric to track the success and profitability of your e-commerce store? Introducing Customer Lifetime Value!

With average lifetime customer value, you could do exactly that. It saves you time by calculating the average amount you make from each customer over the course of their lifetime, which is typically 12-24 months.Customer Lifetime Value allows you to see whether your customers return to your store and how effective your re-marketing efforts are.

TheCustomer Lifetime Value value can be calculated in two ways:

  • Predictive
  • Historic

Historic CLV is a simple metric that adds up all of a customer’s transactions, as well as the acquisition and production costs of the store’s goods.

Predictive CLV is a more complicated computation, but it is more trustworthy in general. It takes into account each customer’s previous transactions as well as specific behavioural trends. It becomes even more reliable when you have a better understanding of your consumers’ behaviour over time.

Customer Lifetime Value refers to how much each customer contributes to your business over the course of their relationship with your company. It considers all costs associated with your product and customer acquisition.

Why Is Customer Lifetime Value Important in E-Commerce?

Although CLV has long been a prominent statistic for SaaS companies, it has recently become an important indicator for e-commerce companies.

Profitability is the most important factor for an e-commerce business owner. CLV is a very significant statistic that every team should focus on because it takes into account every expense of gaining a customer as well as the cost of items to your organization.

CLV should be used by the marketing team to determine their ad budget. CLV should be used by the sales team to focus on customers with high CVs in order to up-sell to them and boost revenue with minimal effort.

CLV allows you to grow revenue significantly more quickly because returning customers are 67 percent more likely to purchase than first-time visits because they already trust your brand.

Investing in repeat consumers and focusing on retaining first-time visitors using various techniques such as email marketing, discounts, and re-targeting can significantly boost your store’s revenue.

How Can Customer Lifetime Value Be Increased?

The most important component of growing your CLV is to use marketing to turn first-time visitors and buys into repeat customers.

Customers will become loyal customers after seeing your brand a few times online, making their first purchase with happiness, loving your brand, and returning to buy more.

Because building a loyal customer base takes time, you can concentrate on your marketing to hasten the process. The goal of your e-commerce website, sales procedure, and promotion should be to keep clients for a long time.

Repeat buy campaigns are ideal for increasing CLV since customers who have purchased twice from your company are considerably more likely to make third, fourth, and fifth purchases.

Rather than trying to offer a more expensive item to a first-time customer, it’s far preferable to focus on keeping them as a long-term customer. However, you should not overlook boosting their average order value in the meantime.

Offer discounts and free shipping to first-time consumers to encourage recurring purchases. More significantly, you can send them emails with products that are relevant to the one they bought. The more they come back, the higher your CLV becomes.

Conclusion

Customer Lifetime Value is a vital indicator for every e-commerce organization because it is focused on retaining and enhancing the value of your customers.

It considers all costs so that teams can concentrate more securely on them. Optimizing your marketing and sales focus to optimize Customer Lifetime Value is a wonderful way to increase brand loyalty, customer retention, and business growth.

How EasyRoutes Can Help

Did you know that 55% of consumers believe the most important aspect of online customer service is speed of delivery services offered?

Or that if a purchase can be tracked throughout the delivery process, 85 percent of consumers are more inclined to shop from that retailer again, and five times more likely to suggest that merchant to friends?

EasyRoutes provides all the tools you need to do your own deliveries and provide an amazing delivery experience for your customers. Learn more on the Roundtrip website.

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About Roundtrip

Roundtrip's mission is to equip every business with the software tools they need to deliver products to their customers in a delightful way. Thousands of worldwide choose EasyRoutes to power their local deliveries across dozens of product categories, from meal kits and groceries to coffee, cupcakes, kibble, and so much more. Our easy-to-use route planning and delivery optimization app is certified Built for Shopify, a two-time Shopify staff pick, and the top rated local delivery app on the Shopify App Store.

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