The Customer Lifetime Value (CLV) is an estimate of the amount of revenue a customer will generate over the course of their relationship with the eCommerce. It is a very useful method to be able to calculate marketing costs and analyze an acquisition strategy. Customer retention and loyalty is an essential part of ensuring that you get the maximum value from each customer.
Now that we've gone into context, let's dig a little deeper to tell you what it is and how it is calculated.
How is Customer Lifetime Value calculated?
When measuring this, it is best to look at the total average revenue and profit generated by a customer. Each of these provides important information about how customers interact and whether your overall marketing plan is working as expected.
If you are like me and math is not your thing, don't worry, because Connectif does the math for us. To do so, you need to fulfill some of the following requirements prerequisites, In the end, without basic data, there is nowhere to scratch:
- WeatherYour account must be at least 4 months old.
- CustomersYou need at least 500 different buyers.
- RecurrenceOf these 500 customers, at least one of them must have 3 or more purchases. This is how the CLV is displayed in Connectif in each customer's contact file.
The CLV is updated at several different times to get the most out of the data and to make the machine learning system more and more accurate. By default, once a month CLV will be recalculated for all contacts with at least one purchase. Thus, the longer it is active and the more data it can collect, the more accurate it will be. In addition, when a purchase occurs, the CLV of the contact will be recalculated.
We love to say that Connectif is a living tool and this type of autonomous learning reaffirms that belief. But what do all these terms mean?
Identifying contacts with a lower than average CLV of your ecommerce and low purchase forecasts will help you to take action to convert them into repeat customers. Once segmented, you will be able to determine the best strategy to follow.
Now that we've seen what CLV is and how Connectif accounts for it, let's get down to the important stuff. Having this kind of tool is awesome, but even better is know how to apply them correctly and get the most out of them.
To see this, let's take a closer look at today, where data is a fundamental component of marketing automation. Through the Data First, We can harness the power of customer data to create personalized, targeted marketing campaigns that are more likely to resonate with our target audience.
This approach involves recopying and analyzing data to obtain information on their behaviors, preferences and needs. By understanding these key factors, we can create flows with the right message, at the right time and through the right channels.
With data-driven information, we can be more efficient, effective and profitable, which ultimately translates into a higher return on investment and greater customer satisfaction.
Strategies & workflows to build loyalty based on CLV
Now, what tactics will increase the likelihood that a customer will buy more?
- Customer with high CLV Reward your most loyal customers with preferential access to a promotion. It is a very common practice to offer special treatment to those contacts who have a high CLV (+500€) and send them an email 6 hours before a powerful campaign is launched so they can enjoy it before anyone else.
In this case, we are going to add the CLV Alto by means of a node of “Dynamic Plus Segment”. In this way we can select both contacts subscribed to the newsletter and those with a CLV greater than 500 €. For this strategy, it would not be necessary to add further conditions, but the Dynamic Segment Plus offers us endless possibilities for grouping your contacts, both for inclusion and exclusion. We recommend that you take a look at it!
- Customer with Medium CLV. Another one of Connectif's many great features is the ability to make comprehensive integrated forms. For your contacts with medium CLV (200€ - 500€) you can conduct a return survey and connect with them, while we conduct an in-depth market study.
In this case, in order to make the selection of the CLV Medium, we are going to use a “dynamic segment” basic. We would only have to add the conditions of:
- Customer Lifetime Value (12m) - is greater than - 200€.
- Customer Lifetime Value (12m) - is less than - 500€.
The idea is to create an empty landing page on your site where we will place an inline with the returns form. Once submitted, we assign a coupon and send an email with the reward for the time invested.
Below you will find a example of the type of questions that can be asked:
- Customers with low CLV. A very good way to reactivate those contacts with a low CLV (-200€) is to offer them gifts and exclusive offers to encourage brand loyalty. The idea of this workflow is to assign a special coupon and make a first impact. After 4 days, a reinforcement will be made if the customer has opened the first email but has not made any purchase in the last 4 days.
- P-Alive (+70%). In order to build customer loyalty, we can create a rewards program and thus encourage repeat purchases, with rewards that are attainable and desirable. In this case, when the customer makes a purchase and complies with the P-Alive +70%, we evaluate if he/she has made a purchase +50€ and in the positive case, we assign 20 points; in the negative case, we only assign 10.
The idea is to send an email right after the purchase with a {{points}} variable where we inform the customer of what he has accumulated, what he has added thanks to his purchase and a list of advantages he can enjoy if he uses them soon.
In this case we are going to use the node “Check Value”The P-Alive value can be determined and only contacts with a P-Alive value higher than 70% can be taken.
In addition, we are going to add a second node “Check Value” to determine if the total price of the purchase has been greater than 50€ and on that basis assign more or less points.
- Churn Rate (+70%). Old customers want to know that you haven't forgotten about them. Facilitating their contact with you is also essential. Taking the Churn Rate +70% data (remember that now the higher it is, the less likely the customer is to buy) we can make an impact based on whether they have opened emails in the last month. If he has, we send him an email; if he has NOT, better to look for other ways. If we have their phone number, we can try the SMS channel.
The content of the email and SMS has to be a close message, where we remind the customer of the brand, products based on previous visits or purchases and/or a countdown with a coupon to reactivate it.
The customer's CLV represents the total revenue over the course of their time with our eCommerce. This helps a company forecast profitability, set customer acquisition budgets and determine growth and improvement targets. Moreover, with Connectif in hand, exploiting this data to be able to impact the segmented customer can be the best loyalty option.
We do not want to close this post without first making a few brief comments. essential tips and recommendations:
Ready to start calculating the Customer Lifetime Value of your customers? In Geotelecom we help you to design and plan an adequate loyalty strategy thanks to different variables. Contact us now and find out how it can benefit your strategy. Marketing Automation.
