Here’s something you didn’t know until today: according to the latest data (from 2020), 73% of first-time purchasers won’t return to your shop.
This means that you lose more than half of your first-time customers. Customers you acquired with hard work and outstanding financial and strategic efforts.
So you’re stuck in a vicious circle: you spend a lot of $ on customer acquisition, but they leave after the first purchase. So you have to reinvest in acquiring more customers, only to get dumped by them again.
Round and round the merry goes, customer acquisition costs are going higher, and the business is going nowhere.
And yet, best-in-class eCommerce leaders don’t need to worry about any of it.
Their conversion rates are through the roof, customers return for repeat purchases, customer loyalty is on point, and they don’t rely solely on acquisition.
Are they selling different products? No.
Are they just lucky? No.
Are they treating their customers differently? Definitely, yes.
More thoughtful onboarding, personalized messaging, prevention campaigns, quick problem solving – all these and more are incorporated into those Customer Value Optimization strategies that make all the difference between big names and small players in eCommerce.
93% of customers* will likely return for repeat purchases if companies provide excellent customer experiences.
Are you keen on joining the ranks of top players, providing excellent customer experiences, and increasing sales?
Dive into this guide to Customer Value Optimization, learn how to deploy a successful CVO strategy, and let’s take your business from “ok, I might these guys a try” to “amazing company, you just HAVE to check out their products.”
How do you calculate your Customer Value?
Before we embark on the Customer Value journey, let’s discuss the concept.
Customer Value tells you how healthy your business is, how profitable it is, and how well-prepared the management is. Most importantly, Customer Value tells you how customer-centric your company is.
In terms of the actual formula, to calculate your Customer Lifetime Value, you need to subtract the costs of acquisition and serving a customer from the total revenue provided by the customer.
customer revenue – the cost of acquiring and serving that customer
You can see from the formula that to increase CLV and turn a customer into a profit maximizer, you actually need to increase the revenue generated by the customer.
You can improve Customer Lifetime Value through the process of Customer Value Optimization.
So, what exactly does Customer Value Optimization refer to?
With Customer Value Optimization, you analyze your customer database (meaning your first-party data) and use the insights you uncover to adjust and improve the customer lifecycle across all touchpoints: from acquisition to retention and loyalty.
The end-game with the CVO process is to get all the information you need to increase the number of repeat and loyal customers.
Fortunately, with CVO, you can use the info you already have from the customer base, so you aren’t affected by the cookie deprecation or by other privacy settings that rendered third-party data ineffective in the past.
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Steps to Customer Value Optimization
The CVO process is, in fact, an end-to-end optimization process, starting with the initial research and ending with the debrief.
Here’s how the CVO process works for Omniconvert. You will notice that a significant part of the process is reserved for the research stages.
Truth be told, without research and the type of insights only customers can provide, strategists can’t develop relevant ideas for a highly customized experience that keeps customers from churning.
Combined with the Net Promoter Score (NPS), customer research helps you pinpoint precisely what your customers need, what they expect from you, and why they would leave you.
Some people don’t find research as sexy as digital marketing strategies, but researching your customers definitely pays off. We advise you to concentrate on research as you do on your actionable plan, and you’ll see the difference in your results.
Step 1 – Quantitative Research
The first step is analyzing the data from your existing customers to identify friction points or certain data anomalies.
Hint: Omniconvert Reveal translates all your customer data into actionable insights, allowing you to make data-driven decisions to improve your CLV.
See how Reveal helps you increase the number of loyal customers, improve Customer Lifetime Value, and maximize profits with automated RFM segmentation and actionable insights for your eCommerce business.
With the quantitative research, you want to identify:
- Any sudden changes in your profits happening at a specific moment
- Sudden shifts in retention rates or patterns in retention rates
- Toxic products (that drive customers away) or rockstar products (that encourage retention)
- Customer purchase habits
Step 2 – Qualitative Research
In this stage, you want to survey customers from various customer segments – not just the best ones – and gain more insights about them.
The more insights you get, the easier it will be in the latter steps. Create your surveys as detailed as possible, understanding your end goal.
Above all, with qualitative research, you want to:
- Identify customer behaviors
- Analyze expectations vs. reality and identify the gaps (if any)
- Get first-hand feedback about your products
- Pinpoint directions of optimization for the customer journey
- Bring in insights that can generally help with the retention rate growth and CLV optimization
Step 3 – Jobs to be Done
The last step in the research stage is interviewing 7-10 top customers using the JTBD methodology.
Hint: if you’re unfamiliar with the JTBD methodology, check out this article and see how to use JTBD interviews to identify the reasons behind customers’ buying decisions.
The end goals with JTBD are:
- Defining the market around the jobs that your service provides
- Uncovering customer needs (you might be surprised by the real needs of your ideal customer profile)
- See whether or not you’re delivering on the results sought by the customers
- Uncover hidden opportunities
- Bridge your products with market opportunities
Step 4 – Analyze & Update the Customer Journey
Now that you have all the data and know so much more about your customers, it’s time to see where you stand in terms of giving them what they need.
The first part here is to analyze your current customer journey.
From website visitors to repeat customers, don’t leave any stone unturned.
Look at the traffic sources, email marketing efforts, advertising approach, and customer service department.
With all the information from the research stage in mind, aim to highlight the top 3 critical points you need to address in your current customer journey.
They can be related to products, marketing communications, or the sales funnel. At this stage, you’re basically establishing the list of priorities you need to address to improve the customer value.
After you have your priorities in check, you must craft personalized strategies and experiences for each customer segment.
Step 5 – Launch, monitor, and optimize.
Now it’s time to launch the personalized strategies from Step 4, monitor, and optimize them.
Your purpose here is to treat your customers differently and more personalized while ensuring your approach is profitable and increases Customer Value.
Get to work on optimizing your marketing campaigns, the customer service approach, and the product assortment.
For example, during the research stage, you might discover that your power customers are hiring your products for a different job than the one you had in mind when you advertised it.
So your obvious move here is adapting your messaging to attract more customers like your ideal ones, highlighting the new job.
Besides bringing you more high-valued customers, this simple change can also help with customer acquisition costs – as you will only spend your budget on prospects mimicking your valuable customers.
How to choose the right Customer Value Optimization agency
If you aren’t yet versed in CVO or don’t have the time to take on this process, you might entertain the idea of outsourcing your Customer Value Optimization efforts to an external agency.
An excellent idea – more often than not, hiring an expert to take on responsibilities you aren’t prepared to tackle is more cost-effective.
Yet, before picking a CVO Agency to pitch in your digital marketing efforts, it’s wise to be aware of both green and red flags.
🟢Proven Track Record
Any trustworthy agency should be capable of providing references, testimonials, and reviews from their previous partners.
Besides providing proof of results, an agency should be vocal about years of experience, the depth and breadth of their knowledge, and the strategies they previously used.
Obviously, NDAs might prevent an agency from being 100% transparent about results and strategies, but they should disclose as much as possible about their experience.
After all, you must understand their level of expertise and get an idea of their capabilities to guide your business through a successful CVO process.
Keep in mind that CVO isn’t a “set it and forget it” marketing strategy. It’s a complex endeavor and can involve multiple verticals and professionals to pull it all together.
You should ensure the agency has the resources and abilities to undertake simple and complex projects for your eComm business.
🔴No previous clients
Evidently, a fair share of new companies will exist inside the CVO world, and everybody deserves a chance to prove themselves.
However, when an agency can’t name a single happy previous client, you should expand your search and look at other options. Either that agency is so new to the market, they haven’t had a chance to gain experience yet, or their past efforts didn’t bring any results.
If you’re determined to give a chance to new agencies, you should at least check about people employed by that agency. At the very least, make sure people working on your account have in-house CVO experience for a previous company, or come from a background of CVO.
🟢They have access to software and tools
If a man is known by the friends he keeps, then an agency is known by the partnership they keep.
A capable agency has experience working with various tools and software suites and even partners with them.
Look for these partnerships, as you need to ensure the company has access to all the necessary tools to meet your CVO objectives.
Small CVO companies will try to save money and avoid investing in expensive subscriptions, limiting their ability to deliver satisfying results.
🔴Lack of focus
Some agencies will include CVO in their list of services and present themselves as full-stack agencies.
While this isn’t necessarily bad, be wary of companies jumping on the CVO “trend” without taking the time to gain the necessary skills and relevant experience to help you.
Custom Value Optimization is too important and has too much potential to be treated as a nice to have, an extra perk someone can provide for you.
Yes, your partner agency should employ professionals skilled in multiple tasks: customer research, data analysis, content creation, performance marketing, customer service, and so forth.
However, this doesn’t mean you should compromise and pick an agency that treats CVO as an “add-on.”
🟢You have good chemistry
Like in any other relationship, chemistry is also essential in a business partnership.
There will be many business meetings, work sessions, briefing, and debriefing sessions. Your working relationship will span a long time, but it will also be delightful if you operate on the same wavelength.
In the best-case scenario, your business and the agency will share the same values. They will understand your core motivations and treat your objectives as their own.
If you can’t find your soul-mate in terms of a CVO agency, at the very least, take the time to understand their framework and processes, and see if you agree with their workflow.
🔴They seem disinterested in your business
You can tell much about your future partnership with a CVO agency from the first discovery call. If they start talking about strategies, experiments, and approaches without taking the time to ask questions and understand your business first, you should run.
At some level, your business is a lot like your child.
You’re doing your best to help it succeed, emotionally invested in its well-being, and hurt when things don’t go as you hoped.
So you’re not going to leave its growth in the hands of just any random agency.
Work with people who do their best to understand your target customer and the problems solved by products.
Otherwise, they won’t be capable of delivering the proper strategy and tactics to build brand loyalty, optimize the customer journey, and provide the results you hired them for.
Who Benefits from our Customer Value Optimization Agency Program?
Over the past nine years, our team of 50+ people worked with hundreds of companies to help them win the eCommerce game: acquisition to conversion to retention.
We’re going through the same processes of research and strategy that we explained above, sticking our necks into data to identify hidden gems, threats, or opportunities.
At the same time, the eCommerce businesses we’re working with are also doing their share to turn our ideas into reality.
If you are an eComm owner or professional and feel you’d benefit from a collaboration with Omniconvert, get in touch with us, and let’s make things happen!
Whether you decide to do it in-house, or through a CVO Agency, keep in mind that the CVO process can span over several months. It’s not an overnight change, so respect the process and allocate each step the necessary time.
Yet it’s worth it – if you want to create customer loyalty and unlock business growth in a healthy, sustainable way.
Your best customers hide beneath your data.
Keep them coming back.
Frequently Asked Questions about Customer Value Optimization
CVM is how you accurately identify what brings value in your customers’ lives. With CVM you can also measure your performance with your customers, as well as against your competitors.
To decide on your value strategy, you first have to determine what drives value for your customers. Shoppers perceive value in 4 ways: functional value (the solution offered), monetary value (the price is right for the perceived value), social value (allows the consumer to connect with others), and psychological value (a product allows consumers to feel better).
CVM helps you identify what your customers perceive as valuable and how well you’re performing against the competition. In retail, CVM can help you gain a sustainable competitive advantage, by being more aligned with customer’s needs.
To maximize the CLV, you need to extract more value from each customer. This means investing in retention and coming up with strategies to build customer loyalty. The most important thing about CLV is to care about your customers. Use a CRM tool like Reveal to dig into your data insights and make better decisions.
Each customer will interpret value in a different way. You have to pay attention in the research phase and ask your customers what they need from you. Shoppers perceive value in 4 ways: functional value (the solution offered), monetary value (the proce is right for the perceived value), social value (allows the consumer to connect with others), and psychological value (a product allows consumers to feel better).
Shoppers perceive value in 4 ways: functional value (the solution offered), monetary value (the proce is right for the perceived value), social value (allows the consumer to connect with others), and psychological value (a product allows consumers to feel better).
Customers don’t like it when you treat them as part of a bigger group – they prefer individual attention. They also dislike the feeling you’re only after their money and they hate being lied to.