Understanding Customer Lifetime Value and How to Improve It

Jack D'Errico

Jack D'Errico

Our video series progresses with Trellis CEO Isaiah Bollinger sharing some tips about maximizing Customer Lifetime Value (CLV) in the eCommerce industry. The CLV metric is a useful tool to help brands gain insight on their customer base and optimize their marketing strategies and fulfillment operations to best serve the customers that give them the most value long term.

In the Trellis Guide to the eCommerce Customer Lifecycle, we mentioned that customer retention is the most important aspect of eCommerce. Prioritizing retentions allows brands to maximize customer lifetime value and stay in business longer. Customer lifetime value is the predicted total value of an individual customer over the duration of your relationship with them.

Calculate CLV

The first step in using CLV to optimize your business is to be able to calculate and interpret the data. Take the Average Order Price x Average # of Orders over the Lifetime of a customer to give you the Lifetime Value of your customer. This can act as your baseline but the better source for insight can be found by calculating the CLV for different customer groups to best understand your demographics.

Customer data is a powerful tool and brands should take full advantage of this resource. Find segments that yield the most CLV and target them specifically. They are the customers you want and should fight extra hard to acquire them.

This important piece of data can also help you find out why customers may be leaving and spark a solution. Subscription-based services are notorious for having problems with turnover and canceled subscriptions. Many of these customers have most likely canceled for a common reason and learning from their feedback is integral. Avoid the Drop Off effect by having the foresight to see it coming and prepare.

Customer retention strategies are focused on bringing customers back, again and again, and maximizing the profitability of each existing customer. CLV is one of the most important measures that online brands should focus on.

For a more in-depth look into CLV and tips to increase it for your eCommerce business, take a look at the Retention portion of the Trellis Guide to the Ecommerce Customer Lifycely.

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