What is Customer Lifetime Value? Strategies and how to optimize it in your business

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 average total revenue generated by a customer and the average total profit. Each provides important information about how customers interact and whether your overall marketing plan is working as expected.

Customer lifetime value

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 prerequisitesIn the end, without basic data, there is nowhere to scratch:

  • WeatherYour account must have been purchased at least 4 months ago.
  • 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.

workflow clv

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 the 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?

customer lifetime value concept

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.

lifetime value customer loyalty

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 it correctly and get the most out of it.

To see this, let's take a closer look at today, where data is a fundamental component of marketing automation. Through the Data FirstWe 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 profitablewhich 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.

clv workflow

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 the contacts subscribed to the Newsletter and those with a CLV greater than 500€. For this strategy it would not be necessary to add more conditions, but the Dynamic Segment Plus offers endless possibilities for grouping your contacts, both for inclusion and exclusion. We recommend you take a look at it!

connectif dynamic segment plus

  • 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.

clv average customer lifetime value

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€.

customer lifetime value workflows

The idea is to create an empty landing page 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:

example customer lifetime value

  • 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, make a first impact and after 4 days make a reinforcement with the conditions of IF you have opened the first email but have NOT made a purchase in the last 4 days.

customer lifetime value low

  • P-Alive (+70%). In order to build customer loyalty, we can create a rewards program and thus encourage repeat purchases, with rewards that are achievable 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.

customer lifetime value

The idea is to send an email right after the purchase with a {{points}} variable where we inform the customer of the points they have accumulated, the points they have earned thanks to their purchase and a list of advantages they can enjoy if they use 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 picked up.

check customer lifetime value

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.

case study customer lifetime value

  • Churn Rate (+70%). Old customers want to know that they have not been forgotten. 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 done so, we send him an email, if he has NOT, it is better to look for other ways. If we have their phone number, we can try the SMS channel.

what is churn rate

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.

total ecommerce customer revenue

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 the post without first making a small essential tips and recommendations:

tips for calculating customer lifetime value

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.

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