Want to Increase CLTV? Focus on These 5 Key Metrics

When it comes to running a successful eCommerce business, one of the most important metrics to keep an eye on is customer lifetime value (CLTV). 

CLTV measures the total amount of money a customer will spend with your business over the course of their relationship with your brand. By focusing on increasing CLTV, eCommerce business owners and marketers can not only boost revenue, but they can also build stronger relationships with customers and improve the overall health of their businesses.

Increasing CLTV requires a deep understanding of your customers' behaviors and preferences, as well as a willingness to invest in the right strategies and tactics. To make this process easier, we've partnered with Triple Whale to compile a list of the top five critical metrics that can help you increase CLTV for your eCommerce business.

These metrics are, in order:

• Repeat purchase rate
• Average order value (AOV)
• Customer retention rate
• Customer acquisition cost (CAC)
• Net promoter score

By tracking and optimizing these metrics, you can identify areas for improvement in your customer experience, marketing, and sales strategies — and ultimately, drive more revenue and customer loyalty for your eCommerce business.

Let's dive in.

Repeat purchase rate

Repeat purchase rate is the percentage of customers who return to your store to make a second purchase. A high repeat purchase rate indicates that customers are satisfied with their previous purchase and are willing to come back for more, which can increase their lifetime value.

To increase repeat purchase rate, try the following strategies: 

• Focus on providing excellent customer service.
• Create personalized and engaging email campaigns to nurture existing customers and incentivize them to come back for more.

• Try offering free shipping on the next purchase, or providing a discount code for existing customers.
• Create a loyalty program that rewards customers for making repeat purchases.

One company that has done an excellent job of increasing their repeat purchase rate is L’AMARUE, a skincare brand founded by a mother-daughter duo. By providing exceptional customer service (including customer support via text), fast and reliable shipping, and personalized product recommendations in the form of a skin wellness quiz, L’AMARUE has created a loyal customer base that keeps coming back for more. 

By following their example and focusing on improving your repeat purchase rate, you can create a similar level of loyalty and success for your own eCommerce business.

Average order value (AOV) 

AOV is the average amount a customer spends per transaction. Increasing AOV can help to increase the total revenue generated from each customer over their lifetime.

One surefire way to increase AOV is to provide free shipping. 

If there is one thing that frustrates most customers, it’s paying for shipping costs. Research shows that 85% of consumers prefer free shipping over fast shipping — so using this concept will give your customers a breather and fetch you a higher AOV. 

Take Doris Sleep, for example. They encourage customers to buy a set of two pillows to become eligible for the free shipping threshold.

You can also personalize the customer experience by recommending related products based on your consumers’ purchase history or browsing behavior.

Bundling products is another way to help nudge customers to a higher AOV while ensuring they get better value. To implement this, determine which of your products are complementary to one another and bundle them together. For example, Bath & Body Works has an entire page dedicated to bundle offers that are marketed as gift sets.

Increase AOV, and your CLTV will skyrocket along with it.

Customer retention rate

Customer retention rate measures the percentage of customers who continue to purchase from your store over time. A higher retention rate means that customers are loyal to your brand and are more likely to make repeat purchases, leading to higher customer lifetime value.

Customer retention rate is all about creating a personalized and memorable customer experience that meets your customers' needs and exceeds their expectations. To do this, you have to continually invest in customer engagement programs that provide regular communication and touchpoints with your customers. 

By staying top of mind with your customers and providing ongoing value, you can create a strong sense of loyalty and keep them coming back for more.

One example of a company that has successfully improved their customer retention rate is Starbucks.

The coffee giant offers a loyalty program that provides exclusive discounts, free drinks, and other perks to its members. The program has been hugely successful in retaining customers and encouraging them to make repeat purchases, resulting in a steady revenue stream.

Customer acquisition cost (CAC)

CAC measures the cost of acquiring a new customer. A lower CAC means that you are spending less to acquire each new customer, which can increase their lifetime value by increasing your profit margins.

There are myriad ways to lower CAC, and therefore increase CLTV, but our favorite is via SEO.  By optimizing your website for search engines and creating high-quality content, you can attract more traffic to your site without relying on paid advertising.

To execute this strategy effectively, start by conducting keyword research to identify relevant keywords that your target audience is searching for. From there, optimize your website and product pages to include those keywords and improve your search rankings. You can also create a blog or content hub to publish high-quality content that will attract and engage potential customers.

For an example of a company that has successfully leveraged SEO to lower their CAC (and therefore increased their CLTV), look no further than Warby Parker.

The eyewear retailer invests heavily in creating high-quality content, such as their blog, that ranks well in search results and attracts new customers to their site. By focusing on creating a strong organic search presence, Warby Parker has been able to reduce their dependence on paid advertising and lower their CAC over time.

Net promoter score (NPS)

NPS measures customer loyalty and satisfaction by asking customers how likely they are to recommend your store to others. A higher NPS score indicates that customers are more likely to refer others to your store, which can help to increase customer lifetime value through word-of-mouth marketing.

NPS is calculated by subtracting the percentage of detractors (customers who are unlikely to recommend your business) from the percentage of promoters (customers who are highly likely to recommend your business). It’s a critical metric because it provides a simple and standardized way to measure customer loyalty across all business types.

By conducting regular NPS surveys, you can gather valuable feedback from your customers and identify areas for improvement in your business. You can also use NPS to benchmark your business against competitors and track progress over time.

To conduct an NPS survey, all you have to do is ask your customers a single question: "On a scale of 0-10, how likely are you to recommend our business to a friend or colleague?" 

Based on their response, customers are categorized as promoters (9-10), passives (7-8), or detractors (0-6).

Measuring NPS can help improve CLTV in eCommerce by identifying areas for improvement in the customer experience. For example, if you have a high percentage of detractors, you may need to focus on improving the quality of your products, customer support, or website usability. By addressing these issues and improving the customer experience, you can increase NPS and drive long-term revenue growth for your eCommerce business.

CLTV is the symptom, not the cause

There you have it — our top five metrics to focus on if you want to increase CLTV. While CLTV is a critical metric to track, it is important to remember that it is a symptom of underlying factors such as customer satisfaction, retention, and loyalty. By focusing on these ancillary metrics, businesses can identify areas for improvement in the customer experience and take steps to increase customer loyalty and retention.

This post is a product of a partnership between Smartrr and Triple Whale. Try Triple Whale to access and leverage key data to transform your business, and check out Smartrr to level up your subscription offering and increase customer engagement.

_________________________________________________________________________________________________________________

Author: Gordon Donnelly

Gordon Donnelly heads up Web Strategy at Triple Whale, where he's helping build the definitive AI data platform for eCommerce businesses.