Learn how to increase customer lifetime value to improve margins and drive sustainable growth for your business.
Learn how to increase customer lifetime value to improve margins and drive sustainable growth for your business.
Merchants feeling the pressures of shrinking margins and rising supply chain costs are looking for ways to increase Customer Lifetime Value (CLV) to increase their profitability.
Ahead we’ll examine the importance of Customer Lifetime Value for your business and how building a fulfillment network to meet customer expectations can drive better, more profitable customer experiences.
On the run? Download our guide How to Win Customers for Life to learn how faster fulfillment increases Customer Lifetime Value.
Customer Lifetime Value (CLV) is a metric used to measure the amount of revenue a customer brings to a business over the course of their entire life cycle as a customer.
A customer’s life cycle can vary by industry. Household staples like cleaning supplies, for example, can have a very long customer lifecycle. We all have brands we reach for every time we go to the grocery store. And most of us know someone who will only buy one model of car for the rest of their life.
Other products have a limited life cycle – diapers and infant formula, for example. Most adults are only parents to young children during a limited window of time. Once their children outgrow those products, they no longer purchase them, regardless of how faithful they are to a single brand. However, when consumers become fierce brand advocates, they will recommend them to their friends and family.
Customer Lifetime Value depends not only on the length of the customer life cycle but also on the amount of money a customer spends over their lifetime. It’s important to find ways to re-engage with customers to encourage repeat purchases. Many brands do this by:
Most merchants learn quickly that it’s less expensive to retain an existing customer than it is to acquire a new one. In fact, Harvard Business Review estimates that acquiring a new customer can be as much as 25 times more expensive.
Customers making a first-time purchase may want to dip their toe in, purchasing a small quantity or a low-value item until you gain their trust. It’s important to build strong relationships with customers until they feel comfortable creating larger carts with a higher Average Order Value (AOV).
A recent survey revealed that over half of merchants have seen lower margins this year, largely due to increased supply chain costs. To succeed in the current market, savvy merchants are looking to optimize their customer experience to increase Customer Lifetime Value (CLV), lower their Customer Acquisition Costs, and increase their margins.
In today’s digital-first retail environment, fulfillment and delivery are key factors in creating an excellent customer experience. eCommerce shoppers’ first physical experience with a product is the delivery experience, making fulfillment a key factor in increasing customer lifetime value.
Fast shipping is an expectation for today’s consumers. In fact, a recent consumer survey revealed:
Additionally, merchants report that fast and free shipping promises are more effective than discounts or free gift offers at improving cart conversion rates. In fact, 65% of merchants report that a 1- to 2-day shipping promise improves cart conversion rates by up to 25%.
While fast shipping promises can attract new customers, actually delivering on those promises can retain them. A recent study by Gartner revealed that poor supply chain performance can significantly decrease customer loyalty – even more than price increases.
All told, supply chain issues such as delayed shipments may decrease the chances of a repeat purchase by up to 87%.
On the other hand, 79% of consumers say they are more likely to make a second purchase from a merchant after a positive delivery experience.
The promise of fast shipping entices shoppers to add more items to their cart. In fact, 84% of consumers admit that they have added something to their cart to meet a minimum threshold to qualify for free shipping.
Larger carts create economies of scale and yield higher profit margins by:
Ultimately, customers who spend more money per purchase have a greater Customer Lifetime Value, driving more profitability for your business.
Faster shipping doesn’t mean more expensive shipping. Here’s how you can improve your delivery speed and increase sales without sacrificing margins.
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