LTV Marketing: How a Great Post-Purchase Experience Can Enhance Customer Lifetime Value

By Ashley Scorpio, Vice President of Partnerships at Hawke Media

Customer Lifetime Value (CLV) or Lifetime Value (LTV) represents how much revenue a specific customer contributes from their first purchase through all their additional purchases over time. Since customers spend more on subsequent purchases than they do on their first purchase, customer loyalty becomes a key factor in a company’s profitability.

“In apparel, the average repeat customer spent 67% more in months 31–36 of his or her shopping relationship than in months zero-to-six,” notes Bain & Company.

That customer’s fifth purchase is also usually 40% larger than the first. The 10th purchase is, on average, 80% more. They are not just buying more, but they are also buying more expensive items. This drives their customer lifetime value considerably higher the longer they’ve been shopping with your company.

What Is Customer Lifetime Value?

Customer Lifetime Value (CLV) is a financial projection indicating the total revenue you can expect from a single customer account for the entire time they purchase from you. CLV is often referenced in relation to CAC, or Customer Acquisition Cost. You can compare the CAC to the CLV to determine how long a customer must continue shopping with you in order to break even on the acquisition cost, which includes marketing, advertising, and sales.

Using the Customer Lifetime Value Formula to Calculate CLV

Understanding the customer lifetime value formula can deliver great insights into your most profitable market segment so you can focus your time on finding, converting, and retaining customers with a high CLV.

Calculating the CLV is a multi-step process. First, calculate the average purchase value from any given customer by dividing the total purchase value by the number of purchases. For instance, let’s say a customer made five purchases, in total, of the following amounts: $100, $110, $120, $130 and $140. Added together, that’s $600 in purchases, and divided by 5, that gives an average purchase value of $120.

Then, you’ll need to know your average customer lifespan, by dividing the sum of customer lifespans by the number of customers. For more accurate calculations, you may want to calculate a customer lifespan based on demographics, type of customer, what they’re buying, or other factors, if you have that data available. Otherwise, add the total length of time all your customers have been purchasing from you and divide that by your total number of customers.

Finally, multiply the average purchase value by the average customer lifespan. That’s your CLV.

Traditional Marketing Techniques to Improve CLV

Companies use a variety of tactics and strategies to improve CLV. Loyalty rewards programs, special sales or advance sales for repeat customers, coupons, and customer experiences for VIP shoppers are all ways to improve customer loyalty.

But there are drawbacks to some traditional methods.

If you offer sales, customers are likely to wait for the next sale or coupon to buy what they need. They know they can get a better price with a little bit of patience.

Loyalty rewards programs can be extremely successful in nurturing repeat customers, which can improve your CLV. But they must be easy to use and offer valuable rewards to keep people coming back.

How the Internet has Changed LTV Marketing

Ecommerce retailers know the internet has changed lifetime value (LTV) marketing. Internet shoppers are demanding customers who look for a personalized experience and want to build relationships with their favorite brands. They want to feel like VIPs from the time of their initial purchase. And they want to be rewarded and recognized at every step along the way.

LTV Marketing Trends

More than ever, LTV marketing begins from the very first sale. LTV marketing trends today include things like:

• Tiered rewards programs that deliver better benefits for long-term customers
• Social media engagement to build relationships
• User-generated social media content that spotlights customers, makes them feel special, and positions your best customers as brand evangelists
• Affiliate programs that allow your customers to profit from word-of-mouth referrals
• Personalized marketing campaigns

Most of these tactics are executed immediately after the first sale.

The post-purchase experience is your best opportunity to hook a repeat customer and create brand loyalty for life. Many of these strategies rely on having accurate customer data, so it’s important to be sure your ecommerce systems, loyalty program, and CRM integrate with each other so you can reach customers with personalized messaging, relevant product suggestions, and engaging content.

Enhancing the Post-purchase Experience to Increase CLV

Customers want to know you haven’t forgotten about them the second they click “pay” on your ecommerce site. Follow up with a personalized email thanking them for their purchase. You might include a customer survey that shows you care about their experience.

An automated app that allows customers to track the shipping of their purchase can also improve their post-purchase experience and improve customer satisfaction. Service-after-the-sale, of course, remains important to building customer loyalty and boosting your CLV.

But for today’s customers, fixing any post-purchase problems is the bare minimum companies need to deliver. Make sure your customers can reach you through multiple touchpoints, such as a chat box on your website, text messaging, and social media channels. Using an automated customer service system powered by artificial intelligence (AI) can help speed up responses to customer service complaints and inquiries. Having data on hand about the customers’ purchases can enhance their experience.

Leverage today’s technology to exceed your customers’ expectations, keep them coming back for more, and drive your CLV.

Want to learn more about upgrading your business? Hawke Media is an award-winning digital marketing consultancy and full-service agency founded on the idea that every modern business needs a CMO-level expert to lead digital marketing efforts. Our comprehensive à la carte menu of services and month-to-month contracts mean you get only what you need, when you need it. Get a free consultation here.

Sources

Bain & Company — The Value of Online Customer Loyalty and How You Can Capture It

Hubspot.com — How to Calculate Customer Lifetime Value