Why is Customer Lifetime Value crucial in eCommerce today?

The pandemic season has accelerated online shopping activity and boosted the e-commerce sector. Though people got accustomed to online shopping nowadays, competition also increased rapidly as many brands and SMBs have started online. Hence, it is important to measure CLV or Customer Lifetime Value for an organization that has a prominent online presence.

CLV or Customer Lifetime Value is the amount a customer spends in a particular business during his relationship with the organization. The method of approach can be significant for the business, and can significantly vary on what your business goals are.

CLV is a metric that defines the value of a customer for an organization. Not every client is equally valued. Few of the customers try to stay for a long time and few hop from one service provider to another. The brand loyalty of the customers should always be respected. The rise of e-commerce is based on the fact that a brand can exist only if it has an army of loyal customers. Also, it is easier to manage the existing customers than to look for new ones, and this can improve your CLV scores too. A high CLV score means your business is quite successful, and that should be the business goal too.

Even though CLV is a well practiced concept, there are apprehensions especially among seasoned entrepreneurs who are yet to understand and discover the benefits of CLV.But there are many entrepreneurs who understand that CLV is the best method that, if utilized well, can act as a potent tool to support revenue generation.

One of the major factors that contribute to positive CLV is Customer Experience(CX). You cannot obtain the desired CLV unless you know that the CX value of your business is at par with your competitor organizations. The CX value can be easily checked for a particular period when you have exact numbers of active customers and the customers who have unsubscribed. There are customers who are brand loyal, a few who have recently subscribed and a few who are no more interested in buying the products or availing the services. 

One of the prime business objectives for any organisation is to exceed the expectations of customers, and this is one of the best ways to generate revenue, and for they need exact CX values. The role of CX value is to follow customer-centric business approach and make shopping a delightful experience.

Thanks to the social media and active feedback systems, not only the physical stores, but eCommerce brands too, can improve their CX value and get more engaging customers to try new products or services, refer friends, and buy products even when contemporary organizations offer better price value. The brand loyalty is the prize an organization gets after it comprehends the requirements of the consumer and acts accordingly.

Benefits of higher CLV score

1. High CLV score helps you to measure the net financial results of the marketing campaigns conducted by the business, thus, elevating your store’s CX value.
2. High CLV score can help strategize your marketing and business plans so that you can ladder up and align your financial targets in a better way. If you are a small organization owner, you can create CLV without any hassle.
3. CLV can change your marketing strategy, like creating locality goals and aligning it in such a way that it covers the underutilized areas. It can give your e-store the much-needed boost and provide online identity.
4. It helps the entrepreneur to fine-tune the short and long-term marketing objectives and showcase a better perception of ROI.
5. The CLV teaches how to take care of customers with high value, and thus, encourages sane decision making.
6. You can manage customer relationships in a better way and increase profits. You can retain highly valuable customers by communicating.

Common CLV mistakes

CLV is not a magic wand that can make your business successful in no time. If you cannot use it appropriately, it can waste your money, efforts, and time.

If the company objectives are not properly aligned, it can create a disaster and mislead the business.

Proper calculation and analysis are required for customer segmentation, and it depends on the business nature.

It is not possible to understand and calculate CLV when the organization is merely a startup.

Don’t trust the metric always, as it can be steady and flawed.

Improvising customer onboarding process

A business can grow only when there’s successful onboarding of customers. It can be done by interacting and building relationships with the customers. You can also increase the prices of your goods and services to make the onboarding successful.

Customer behavior study can be helpful to test the onboarding methods. The method must be foolproof and straightforward and can be simple enough to accelerate engagement. Not every customer’s journey to becoming brand loyal is equal, so make sure to focus on them as well.

Customer is special

Every customer is an asset to the organisation. No organisation would like to lose its customer base, and hence, it should take extra effort to make the customer feel valued. Personalisation, offers, easy interactions, after-sales support and above all, offering quality products can make customer relationships better.

Looking into the sales figures

Whatever you see during marketing and promotions is an eyewash. Your sales figures tell how much the clients value the organization. While running an e-commerce store, you cannot see your customers physically, but when they are visiting from various channels and you are getting the details, you know that your marketing strategy is on point.

You need to increase sales for every order and over time, and for that, you need to plan certain marketing strategies. If you do not follow any marketing strategy, you may lose existing customers.

You can use a tool to know about the purchase behavior predictions, especially when running an online store, you can rest assured that you know how to utilize your resources for profit-making. Take the help of insights, and you can calculate your CLV easily.

Consumers are the key components of any business, and when there are more customers, you can easily make money and improve your business. Improving CLV is a continuous process, and it needs patience and efforts to obtain desired ROI (returns on investment).

Note: Before measuring Customer Lifetime Value, understand from your customers if they can trust your brand. It’s a lesson for another day but you can learn about from here.