How to Increase Customer Lifetime Value in 2024

If you want to know how to increase customer lifetime value in your online store, this guide is for you. 

As an ecommerce store owner, customer lifetime value is one of the key metrics you’ll want to pay attention to, to stay on track as you grow your business. 

Monitoring this metric will reveal important information on the long-term value of customers to your business during their relationship with it. Then you can work to improve it and get more value from your customers during this period. 

👋 In this guide, we’ll walk you through what customer lifetime value is and 5 solid strategies on how to increase in 2024.

Here’s what we’ll cover:

• What is customer lifetime value?
• How to calculate your customer lifetime value.
• Why customer lifetime value is important.
• Techniques for how to increase customer lifetime value.

Let’s understand what customer lifetime value is first.

What is customer lifetime value?

Customer lifetime value (CLV or LTV) is an important metric representing the amount of revenue an ecommerce business can expect from the average customer throughout their entire relationship with the business.

It’s an understanding of how much revenue customers bring to your business during their lifespan on average. This can be used to predict how much a single customer will likely bring in during their time with you.

Measuring your CLV enables you to know how healthy your customer base is and how likely your business will grow in the future. With this information, you can make informed decisions on customer acquisition and retention strategies, marketing strategies, customer service, etc. 

NOTE: Although CLV is an estimate, it is developed from the actual revenue your business has received. So by using CLV, you can estimate the revenue expected from a single customer based on past data. 

You can determine your CLV by making a simple calculation which we’ll look at in the next section. 

How to calculate your customer lifetime value

You can use the following formula to calculate your CLV:

CLV = (Average Purchase Value) x (Average Purchase Frequency) x (Average Customer Lifespan)

Here’s how you calculate each component of the formula

• Average purchase value: This is calculated by dividing the total revenue over a certain period by the number of purchases made during that same period.
• Average purchase frequency: You can get this by dividing the total number of purchases by the number of unique customers who made purchases during that period.
• Average customer lifespan: This is the average number of years a customer continues to purchase from your company. This can be trickier to calculate and often requires historical data. You can calculate it by adding up the customer lifespan of each customer and then dividing it by the total number of customers.

Let’s look at an example to see this plan in action.

If you have a coffee shop that charges customers $5 per cup and your regular customers order from you about 4 times a month on average.

If the average customer lifespan is 2 years (24 months), this will be your CLV

In this case, you can expect a revenue of about $480 from your customers.

This is the simplest way to calculate CLV and is suitable for businesses where the above components are likely to remain constant. But you might need to go into more detail if you have a more complex business. 

For instance, if you have different types of customers (like wholesale and retail), you’ll want to segment them into different groups and calculate CLV separately. Also, to look at profits instead of total revenue, you’ll need to subtract customer acquisition and customer service costs (return purchases, shipping costs, etc.). 

Provided you have historical data on your customers’ buying behavior, you can calculate your CLV regardless of your business type.

Next, we’ll look at why you should invest your time and effort into knowing and improving your CLV.

Why knowing your customer lifetime value is important

If you’re looking for steady and sustainable business growth, learning how to increase customer lifetime value should be a top priority. It helps you to develop and implement efficient strategies to acquire new customers and retain existing ones while remaining profitable. 

So here are the benefits of knowing and improving your customer’s lifetime value. 

It helps you to improve customer retention

📈 Repeat customers contribute to a majority of a business’s revenue since they spend 67% more than new customers.

This is why you should focus on retaining customers as much as possible. Monitoring your CLV can help you with customer retention by enabling you to identify customer churn as soon as it happens. Then you can improve your products and services to minimize the churn rate. 

It facilitates customer segmentation

Measuring CLV for individual customers lets you determine the customers most valuable to your brand in the long term.

You can then tailor customer experience and create retention strategies that suit the preferences of these customers so that they stay longer with your business and provide more value to it. 

It improves profitability

Your CLV has an impact on the profitability of your business. If you rely on customer acquisition to make sales, you’ll incur customer acquisition costs (CAC) each time you want to sell. This eats into your profit. 

However, optimizing CLV allows you to get more repeat purchases from existing customers.

📈 Because the cost of retaining customers has been reported to be 5 – 25 times less than that of acquiring new ones, you’ll enjoy the full profit margin of your sales. 

Customer satisfaction

CLV can measure customer satisfaction because satisfied customers will spend more on a business and tend to remain loyal to it.

📈 According to a Hubspot study, 93% of customers will likely make a repeat purchase from a business when they’re satisfied with their experience. 

A high CLV shows that more customers are satisfied with your business. At the same time, a low CLV shows that you need to make adjustments to improve customer experience and satisfaction. 

Business strategy and product development

CLV helps you understand customers’ long-term value, encouraging you to adopt a customer-centric business strategy. This strategy entails improving customer satisfaction, loyalty, and retention. This also helps you to identify opportunities for upselling and cross-selling to boost the average purchase value. 

CLV also enables you to understand the preferences of high-value customers, and you can use this information to prioritize features that resonate with them during product development. 

Now that we know what CLV is, how to calculate it, and why it matters, it’s time to improve it. Next, we’ll walk you through 5 effective strategies for how to increase customer lifetime value. 

5 techniques for how to increase customer lifetime value

Optimizing CLV is all about improving customer satisfaction so that they stay longer with your business and spend more on it.

This, in turn, increases the components that go into calculating the CLV, including the:

• Average purchase value.
• Average purchase frequency.
• Average customer lifespan.

In this section, we’ll discuss 5 techniques you can use to increase CLV by improving these components. 

Improve customer service

Customer service is vital in shaping your customers’ experience and satisfaction. Exceptional customer service can lead to higher customer satisfaction, increasing customer retention and loyalty.

Providing exceptional customer service makes customers want to buy from you again.

📈 In a Forbes survey, 87% of the participants admitted that they would return to purchase from a business that has exceptional customer service.

This shows that improving customer service can increase your customer’s lifespan hence their LTV.

There are a few different things that you can do to improve customer service including:

• Providing responsive support – you should address customer inquiries quickly and accurately. 
• Easy returns – create a comprehensive returns policy that allows customers to easily return items they’re not satisfied with. With easy returns, customers will be encouraged to work with your brand again. 
• Resolving issues quickly and effectively – this helps to minimize customer frustration. 

Part of improving customer service is ensuring they can find help easily when needed. With Flux Checkout for WooCommerce, you can enable them to find help on the order confirmation page. 

Lead customers to your contact pages on the order confirmation page with Flux Checkout

Flux Checkout is built to deliver a seamless customer experience during checkout. It can also help you to improve customer service using its ‘Thank You’ page feature.

You can conveniently add a ‘Contact Us’ link on this page that leads customers to your contact pages should they encounter any issues or have inquiries after making a purchase.

This link ensures that customers can effortlessly reach out for assistance with a simple click. 

Upselling and cross-selling

Upselling and cross-selling are sales techniques used to maximize the potential revenue from customers for each purchase. As a result, they can increase the average purchase value. 

Upselling involves recommending premium, higher-priced versions of the products that customers are interested in. Upsells offer customers more features or a higher-quality product that will give customers greater benefits than the product they’re originally interested in. 

Cross-selling, on the other hand, involves recommending additional products that complement customers’ interests. Cross-sells improve your customer’s shopping experience by making it easy for them to find products they might need.

📈 Both of these techniques are extremely effective, as over 70% of businesses that cross-sell and upsell report that they make up 30% of their revenue, according to a Hubspot survey.

By increasing the average revenue per transaction, upsells and cross-sells help to increase customer lifetime value. 

Upselling and cross-selling are valid techniques utilized by established ecommerce brands, and if you want to add them to your WooCommerce store, you’ll need Iconic Sales Booster for WooCommerce. 

Add cross-sells and upsells in WooCommerce using Iconic Sales Booster

If you’re looking to increase your average order value, then Iconic Sales Booster for WooCommerce is the plugin to help you do this.

It enables you to do at different stages of your customer’s journey using proven techniques like:

• Frequently bought together – You can show customers the products that are frequently bought together with the ones they’re interested in. Sales Booster enables you to do this on the product page just below the ‘Add to Cart’ button, where customers can find them easily. 
• Customers also bought – After the customer adds a product to their cart, this plugin allows you to display a popup containing related products that other customers also bought. For a frustration-free experience, customers can add these recommendations to their order directly from the popup.  
• Order bump at checkout – You can also add an irresistible offer when the customer is checking out to take advantage of the customer’s impulse to buy. To make this cross-sell appealing, you can include an attractive discount and display the popup depending on the contents of the customer’s cart. Customers can add the products in this popup to their purchase without returning to the product or shop pages.  
• One-click cross-sell after checkout –  It doesn’t end there. Sales Booster allows you to cross-sell to customers after checkout. Here, you can add a heavily discounted offer which they can add to their order directly without having to re-enter their credit card information.  

The benefits of Sales Booster

Iconic Sales Booster allows you to change the sales text and customize its position and style to make the offer more appealing to customers. This also ensures that the popups fit seamlessly with the rest of your store’s design. 

Iconic Sales Booster enables you to cross-sell to customers without interrupting their experiences. Since customers have already expressed the intention to buy, they will likely add these recommendations to their purchase. And if they do, your CLV will remarkably increase. 

Offer subscription services 

Instead of getting irregular revenue from one-time customer purchases. You can offer them subscriptions to encourage them to commit to your products and services long-term. If applicable to your business, you can allow customers to subscribe to your products or services weekly, monthly, or yearly. 

This will give them regular access to your offerings, and your business will generate steady recurring revenue from this relationship.

Subscriptions help you to tie down customers longer as they encourage them to commit to your business over a given period. Because of this, they increase your customers’ lifespan and hence their LTV. As a result of these benefits, subscription services are becoming the norm for most businesses.

📈 According to Gartner, 75% of B2C businesses will be offering subscription services by the end of 2023. 

Depending on the type of business you run, you can implement a subscription model in different ways: 

• Software-as-a-Service(SaaS) – if you have a software services company like Shopify or Amazon Web Services (AWS). You can provide subscription-based access to your software applications. 
• Memberships – if you have a fitness center, you can allow customers to subscribe monthly to work out in your gym. 
• Subscription boxes – if you deal in products that don’t fit directly into a subscription model, you can use subscription boxes to make this model work for you. For example, beauty products like makeup, personalized clothing, and razors can all be placed in subscription boxes and delivered regularly to customers who subscribe to them. 

Subscription services can also foster customer loyalty by enabling you to deliver personalized experiences, for example, by allowing customers to select individual items in their subscription boxes. Loyal customers will bring more value over time, thereby increasing your CLV. 

Implement loyalty programs

The best way to inspire customer loyalty is to reward it. With a customer loyalty program, you can reward loyal customers for repeat business and continuously engaging with your brand.

Like subscription services, you can implement a rewards program in different ways depending on the type of business you run.

For example: 

• A bonus point system – Encourage brand loyalty by rewarding customers with bonus points after each purchase. Once a customer has accumulated the required amount of bonus points they can redeem them for incentives like free gifts, discount coupons, etc. 
• Purchase targets – Give customers free gifts, exclusive access to new products, etc. after they’ve surpassed a certain purchase limit. 
• A membership-based loyalty program – Where customers who’ve signed up for your loyalty program get access to exclusive benefits like free product upgrades, personalized discount coupons, etc. 

Loyalty programs help increase average purchase frequency as customers will be motivated to buy from you as often as possible to earn incentives.

📈 Customers who join loyalty programs have been proven to generate 12-18% more revenue than non-members. 

This shows that loyalty programs can also increase the average purchase value. As the average purchase frequency and value increase, so does the CLV.   

User experience optimization

User experience influences CLV because it impacts how customers perceive and interact with your business. A user-friendly ecommerce website makes it easy for customers to navigate, browse products, and complete a purchase.

This gives them a seamless shopping experience that contributes to their satisfaction. When customers are satisfied, they will likely make a return purchase. 

📈 Studies show that brands that provide a good user experience generate 5 – 7 times more revenue than those that fail to do so.

This shows that optimizing user experience can increase the average purchase value, hence the customer’s LTV. 

As an ecommerce store owner, you can optimize user experience by making your ecommerce site user-friendly in the following ways: 

• Mobile optimization – A majority of online shoppers use mobile devices to shop today. In the US alone, 60% of online shoppers prefer to shop on mobile devices. For this reason, making your ecommerce site mobile responsive should be a priority to cater to them. 
• Uncluttered website design – Your website should have clear navigation, organized product categories, and aesthetically pleasing visuals to deliver a better customer experience. 
• Accessibility – Make your ecommerce site accessible to all users, including those with disability. 

You should also ensure that your ecommerce site has a seamless checkout flow that makes it easy for customers to buy from you. A smooth checkout process enables customers to complete a purchase without frustrations, improving their satisfaction. This type of checkout minimizes cart abandonment while increasing conversions. 

You can introduce a seamless checkout flow to your WooCommerce website using the Flux Checkout for WooCommerce plugin.  

Add a smooth checkout flow to WooCommerce using Flux Checkout

With Flux Checkout for WooCommerce, you can create a seamless, straightforward, and user-friendly checkout flow for your WooCommerce store.

To do this, Flux allows you to:

• Introduce a multistep checkout process – It breaks down the checkout process into a series of manageable steps. Customers can complete a multistep checkout without being overwhelmed. 
• Minimize distractions – Flux only displays the necessary sections during checkout. Unnecessary checkout fields like company and specific street number will be hidden so customers can focus on completing the checkout. 
• Include address autocompletion – To save customers’ time, they only need to start typing their address, and then Flux will display the closest matches. Their address will be autocompleted as soon as they select it from the displayed options. 
• Create a custom order confirmation page – Flux enables you to create a custom order confirmation page and add any content to it. You can use this feature to include content that encourages customers to keep engaging with your business after their purchase. This could be a link to your social media accounts or community forum. 

To help you to customize your checkout quickly, Flux has a variety of mobile-optimized checkout templates that you can import and apply. Then customize them to fit with the rest of your WooCommerce store. 

Improve your customer lifetime value today

Your customer lifetime value informs you of how much revenue customers bring to your business during their relationship with it. Monitoring and improving this metric enables you to increase the revenue that customers bring to your business long-term. 

In this guide, we’ve covered some useful strategies for how to increase customer lifetime value. Implementing all of these strategies might seem difficult, but you’ll have all the help you need to do so with the plugins mentioned in this guide: 

• Flux Checkout for WooCommerce – create a seamless checkout and post-purchase experience that encourages conversions and return purchases. 
• Iconic Sales Booster for WooCommerce – cross-sell and upsell at different parts of your ecommerce store to increase the average purchase value. 

Get these plugins from the Iconic store and use them to improve your customer lifetime value today.