12 Practical Strategies to Increase Customer Lifetime Value

To increase customer lifetime value (CLV), you need more customers who buy again, buy more often and stay longer, at a margin that pays for the cost of winning them. This round-up asks twelve eCommerce, CRO, email and retention practitioners one question: if you had to grow a brand's CLV, where would you start? Their answers are the twelve strategies below.

For a long time, CLV was the middle child of eCommerce. It was there and it was acknowledged, but it was never the main focus of an eCommerce manager or owner. COVID changed that. It sped up the move online, changed how buyers behave, and pushed acquisition costs up. Now CLV is a growth metric that nobody can ignore.

Why does customer lifetime value matter more now?

Ad money followed consumers online during the pandemic. In 2020, the IAB reported that ad buyers expected overall 2020 ad spend to fall 20%, while they expected digital spend to be up 13% in the second half of the year compared with 2019. The early-pandemic drop in ad costs did not last, Facebook advertising costs climbed again, and competition sped up the shift of ad budgets to digital, with more spend going to paid search, social and connected TV.

Shopify's Future of Commerce report (2021) drew the conclusion: though reaching new customers is important, rising competition for online attention reinforced the value of keeping existing customers, and retention overtook acquisition and conversion as a top priority for many businesses.

Rising CPMs and CPCs, stricter data privacy and the end of third-party data put CLV in the spotlight as a cure for eCommerce growth. That is true only if the team that handles growth understands CLV, including its flaws (yes, CLV is not perfect), and knows how to work with it. In the wrong hands, CLV can become a quick kick in the pants.

Where does CLV fit in the eCommerce growth formula?

Valentin Radu, Omniconvert's founder, puts it this way: when people think of the growth formula for eCommerce, they usually think of traffic × conversion rate × average order value. For that formula to actually equal growth, you must add customer lifetime value and customer acquisition cost (CAC).

Traffic and conversion rate are vital. If you bring one million new visitors but your conversion rate is terrible, that effort is a waste of time and money. But most eCommerce experts stop there, because they rely only on Google Analytics. It is a fantastic tool for visitor behavior, but a thriving store also needs to analyze customer behavior. If your margin and CLV do not justify what you pay to acquire customers, the business will collapse, because it is not sustainable.

In Omniconvert's work with store data, many companies effectively end the relationship after the customer's first order. They do not check whether that customer bought again, let alone design a journey that would make the customer loyal. Most entrepreneurs try to be profitable on the first order, then neglect the next ones and cut the marketing that would build a habit of buying from them.

Worked example: a store with a $60 average order value, 2 orders per year and a 3-year average lifespan has a CLV of $60 × 2 × 3 = $360 in revenue. At a 50% gross margin, that is $180 in profit. At a 3 to 1 CLV to CAC ratio, the store can spend up to about $60 to acquire each customer. For more formulas and benchmarks, read our full guide to customer lifetime value.

CLV is not a transactional metric

CLV has a transactional and monetary result, but it is not a transactional metric. In a Clubhouse conversation with Steen Rasmussen, he said the main KPI to watch for CLV is customer experience. You can acquire customers every month, but if your post-purchase experience is bad and they never order again, there is no customer lifetime value to talk about. To go deeper on CLV as a marketing strategy, see CLV as a marketing growth strategy and Invesp on the importance of CLV in eCommerce.

12 practical strategies to increase customer lifetime value

Lorenzo Carreri, my partner in this monthly round-up, came up with the question: if you joined a brand tomorrow and had to increase its customer lifetime value, what would you do? Contributor roles below are as given when the round-up was first published.

Build reliable data and research

1. Unify your data, research deeply, then experiment across the business (Lorenzo Carreri)

CRO and Growth Consultant with 11+ years in digital and tech, helping eCommerce and SaaS grow profitably.

First, make sure the data infrastructure is present and reliable. You cannot improve what you do not measure correctly. Bring all data (analytics, CRM, customer support, email marketing, ads, logistics) into one database you can query.

Then go into deep research mode. Segment customers by the channels and ads they came from, first product bought, AOV, repurchase rate after X, Y and Z days, and LTV. Add qualitative data: surveys, customer interviews and support tickets. The questions to answer: Who are my best customers? How are they different? How can I acquire more of them? Why do they buy from me? What new products would make them happy? Then ask the same about your worst customers.

Those insights feed your hypotheses. Prioritize experiments across the whole business cycle by forecasting cost and long-term impact. Iterative product improvements might have a big effect on retention but cost more than improving onboarding. Finally, analyze results on short- and long-term KPIs, and start again.

2. Establish a behavioral baseline before you set a CLV strategy (Shiva Manjunath)

CRO Marketing Manager at Gartner; an experimentation specialist focused on testing to learn and on high-value user experiences.

Establish a baseline of behavior first. As you run and iterate on experiments, in parallel with UX research and surveys, you learn what the customer is looking for. There is no point in considering the lifetime value of a customer you do not understand. The right strategy depends on the business model, the product and the customers, but Shiva gravitates towards four things:

• Segmentation: stop forcing all customers down the same path.
• Experimentation: keep optimizing the experience, with an eye on longer-term metrics rather than short-term wins.
• UX: ask customers what they want, and stop assuming you know better.
• Value: stay top of mind with real value, and reward loyal users with things they find valuable.

3. Get measurement right, then build community after the sale (Elise Connors)

Director of Marketing Client Services at Happy Cog, overseeing SEO, paid media and analytics, and a student of consumer behavior and user experience.

First, make sure measurement is solid. Most analytics setups are unreliable, and without full insight into how the site performs you cannot know what to improve. Then run a robust conversion optimization program that covers not only first purchases but also the post-purchase flow.

Order confirmations and shipping notices do not build community. Community comes from using your data to deepen the relationship. Tips and tricks for the purchase are a good start. Better still is useful information that does not relate to anything you sell, personalized with what you already know about the customer. Because most companies do this badly, it is an easy place to stand out.

Learn from your best customers

4. Interview your best customers and spread their story (Jonathan Ivanco)

Customer Experience Consultant focused on data for eCommerce companies.

1. List your best customers

   Pull everyone who has purchased multiple times, to a total of about 4–5x your standard average order value.
2. Set up calls

   Talk to as many of them as possible.
3. Ask three questions

   How did they hear about you, what gave them the confidence to trust you, and what is the main reason they keep coming back?
4. Spread the common messages

   Make sure those messages appear on the website, product pages, emails and every touchpoint.
5. Audit your outreach

   Review how often you contact people, the content you send, and how you use segmentation.
6. Rewrite the narrative

   Plan how to align your messaging with the narratives your best customers gave you.
7. Analyze cost-effectiveness

   Assess sales and email campaigns, and look for ways to tell a bigger story for the industry.
8. Unlock partnerships

   Partner with similar brands to sell beyond your store and give value beyond your products.
9. Repeat every 6 months

   Run the whole process again twice a year.
10. Use partner feedback

    Turn data and feedback from partner offers into new business opportunities.

5. Turn your RFM segments into an ideal customer profile (Yaagneshwaran Ganesh)

Martech author, TEDx speaker and narrative builder who helps early-stage martech startups build their category.

1. Segment existing customers by recency, frequency and monetary value (RFM).
2. Find what your most valuable customers have in common and make it your ICP.
3. Build a focused onboarding process for that ICP.
4. Engage with content specific to their use case and pain points, without spamming them.
5. Upsell only when it makes sense. The goal is to become their partner and live up to their trust.
6. Pick up the phone and talk to them at least once a month.

6. Find what separates high-value segments and move people up (Will Laurenson)

Customer Experience Consultant who optimizes customer journeys to convert and retain customers, and host of the Customers Who Click podcast.

Once the basic automations are in place (abandoned basket, upsell, repeat purchase, feedback and reviews), create segments. Keep it simple: three value segments (high, medium, low), split by any clear vertical, such as subscribers versus people who buy as needed. Behavior will look different in each group.

Then analyze the differences. What makes some people subscribe month after month, or come back again and again? Quantitative data tells you how much, how often and which products. Qualitative data tells you why: why some subscribe and others do not, why some cancel, and why some bought once and never came back. That is the gold. It lets you shape messaging, the website and marketing to move as many people as possible into higher value segments.

7. Start with unit economics, customer experience and the right conversations (Serge Popovic)

CMO of Crossrope, a fitness brand.

Improving CLV is a process of discovery. Start with the fundamental unit economics (AOV, CAC, CLV) for a high-level view of the marketing engine. Next, look at the NPS score, if there is one, and how customers talk about the brand. It is very difficult to improve lifetime value if the customer experience is broken.

Talk to two segments: repeat customers, to learn what drove them to buy again, and NPS passives, to learn what would turn "just OK" into something worth talking about. Learn the product: what problem it solves, whether people buy it once, seasonally or frequently, the repeat purchase rate, and whether there is room for a subscription.

If the experience is broken, fix it first. If the product is a one-time purchase, extend the line with accessories or limited editions to give existing customers more value. Tactically, for eCommerce brands email is still king: review segmentation, post-purchase flow performance and messaging. There are always low-hanging opportunities.

Segment and personalize communication

8. Segment your email program instead of batching and blasting (Chase Dimond)

eCommerce email marketer and newsletter author.

In any email account, look first at flows (email automation), campaigns and segmentation. The biggest mistakes: brands do not send enough campaigns, do not have enough flows, and batch and blast with no segmentation. There is no silver bullet. You maximize revenue and minimize churn on campaigns, know which segments to hit and when, and have flows at each point of the customer journey.

If Chase had to focus on one thing to increase CLV, it would be proper segmentation. The holy grail of marketing is sending each subscriber the right message at the right time, and segmentation is the only real way to do it.

9. Use personalized storytelling to build loyalty (Irit Levi)

Founder at Day By Day, who turns busy workloads into step-by-step business processes.

Irit is a big believer in personalized content marketing: telling the story behind the company and its products, and leading customers to believe that the product will make them feel something in line with the brand's and their own values. The emails should feel unique to each customer. They are not sales emails; they help customers live out their dreams.

Start with social content that shows how customers feel when they use the products, and collect data on how people engage. As customers buy, learn their habits, wants and lifestyle, then send emails with stories of people who bought similar products and the difference it made. Intense segmentation and conditional content in your email tool make this possible. The stories create loyalty and a desire to be part of the community.

10. Build a data-informed customer profile around moments of truth (Philipp Loringhoven)

Marketing, analytics and CX freelancer at Team Advertico; a marketer, developer and data specialist focused on customer centricity.

Before any strategy or tactic, go back to basics: understand customers and their problems. Why do they buy from you, and what do you offer that competitors do not? Start with first-party data, the CRM and buying behavior to create a data-informed customer profile.

Then build the strategy around the moments of truth where the brand can help customers get their job done, and identify how you add value to their lives. Every tactic follows from that analysis. Creating customers who root for you comes from understanding when and how you help them become better.

Shape the offer and engagement

11. Choose retention tactics with the Retention Marketing Matrix (Alex McEachern)

Founder of Spark Retention, retention consulting for DTC brands, and co-host of The Exchange, a podcast about the post-purchase experience.

Improving CLV is neither easy nor quick, and too many brands start without a strategy. Alex starts with the Retention Marketing Matrix, a simple exercise that shows which retention tactics will work, because a points-based loyalty program is not the best tactic for every brand.

Place what the brand sells on the matrix by AOV and purchase frequency. The right side suits standard tactics such as loyalty programs and basic post-purchase flows. The left side is more about how you structure products and experiences around the core offer. In short: retention is not one size fits all.

12. Hold attention, not only grab it (Abby Wilson)

Founder of Tailor Framed, a web development company that uses user research to make design and copywriting decisions.

Grabbing attention increases traffic, but unless you hold it, people bounce. The aim is to turn traffic into an audience and then into a community that feels a relationship with the brand. Shift key metrics from clicks and views to subscribers and time spent. People who spend more time with you spend more money, so CLV increases.

Instead of individual pieces of content, create a series: blog posts, or even better a podcast, that keeps people coming back and invites them into your story. Commodity content will not work. The series has to align with your core brand message.

One trap connects many of these answers. Marketers put a lot of effort into a snapshot of their reality at one moment, and then need the same effort to recalculate everything next week or next month. eCommerce is dynamic. You have to capture the factors that affect CLV as they change, and analyze the transitions from moment to moment to see the whole picture.

How do you use CLV to decide how much to spend on acquisition?

Subscription businesses such as Netflix show the idea clearly. Take a hypothetical streaming service with a $10 monthly plan, a 60% gross margin, and subscribers who stay 25 months on average:

• Revenue CLV: $10 × 25 months = $250.
• Profit-based CLV: $250 × 60% = $150.
• Acquisition cost: spending $50 per subscriber gives a 3 to 1 CLV to CAC ratio.
• Payback: each month brings $6 of gross profit, so the $50 is earned back in about 9 months.

In month one, the service is $44 down on that subscriber. It is counterintuitive to pay more than a customer's first payment, but the relationship is still clearly profitable. Do not be afraid to lose money in the short run if it secures revenue later. CLV shows how much you can afford to lose.

Maximize value customer by customer

Customers are not a herd of sheep. Some will never pay, some stay a few months, others stay for years. A premium subscriber who stays three years can be worth more than a basic subscriber who stays four. That is why you track customers individually: when someone's activity drops, for example they stop watching, it signals a possible cancellation, and you can act before they leave. Monitoring specific actions on your site shows which steps and features keep customers engaged, and engaged customers stay longer.

Maximize acquisition

When you know CLV and have reduced churn, you can afford to spend more on marketing than competitors, including on free trials and affiliate programs where not every new user becomes a paying customer. Growing lifetime value is what funds more aggressive, still profitable customer acquisition.

How can Nexus by Omniconvert help you increase CLV?

Across the twelve strategies, the same inputs appear again and again: reliable customer data, value segments, the difference between best and worst customers, and signals that a customer is drifting away. Customer Intelligence in Nexus covers those inputs:

• RFM segmentation: classifies every customer by recency, frequency and monetary value, updated from Shopify data.
• CLV tracking: by segment, cohort and acquisition channel, with monthly cohorts tracked over 12, 24 and 36 months.
• Churn signals: an "About-to-Dump" segment of previously active customers whose activity is now declining.
• Activation: segments sync to Meta Ads, Google Ads and Klaviyo, with no CSV export.

To learn the full method behind these strategies, the Customer Value Optimization Expert Course in CVO Academy covers loyalty and retention, segmentation, CLV optimization, research, NPS and cohort analysis. For a strategy list built on the CVO framework, see 12 customer value optimization strategies.

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