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CVO Guide  >  Chapter 4

The Ultimate CVO Guide – Why you need Customer Value Optimization

Here is why you need customer value optimization! Check out the use cases and metrics you can analyze after gathering first-party data and using RFM.

 

cvo importance

Table of Contents

The result of the wholesome process you’ve been reading up until now from this series will reveal new solutions to your marketing and sales activities, such as:

  • Better ad targeting and lower CoCA – achieved by focusing efforts and budgets on specific product and brand recommendations, in specific regions for a certain RFM customer, which in turn can be translated as a higher chance of converting. Basically, if your CLV is $1,499 in one year, you can’t invest more in advertising than this. 
  • Better assortment and merchandising – based on what RFM groups are buying, optimize inventory (stock lower on less popular products).
  • Better customer service – provide priority support, better response rates or tailor-made return programs to customers that matter
  • More word-of-mouth recommendation – happy customers will spread the word about your brand and organic advertising is the best advertising
 

Use cases 


Historical CLV on groups 

If you figured out that the Soulmates group (Customers that purchased most recently, most frequently, and of the highest value) has the highest CLV, it means that these are the customers you want to have in your store. Therefore, you can export this group and create a lookalike audience for paid campaigns that will eventually attract customers like your soulmates who will maintain or even increase the general CLV. 

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Predictive CLV 

Probably the nightmare of every eCommerce Manager is to determine the ideal budget for advertising so they don’t sink the company. Predictive CLV will determine the maximum amount of money you can spend on acquiring a customer so you don’t waste money. 

For example, if your predictive CLV is $782, you have to make sure that your CAC (Customer Acquisition Cost) is lower than this value so you can remain profitable. 

 

NPS score

Some customers will be not satisfied with their purchase or their buying experience – and that’s fine! However, if you don’t act upon them, they will turn into detractors and spread negative words about your brand. The NPS score will tell you who these people you can “treat” are so you can avoid this situation and improve your business in the future. The NPS survey is usually triggered on the thank you page or via email for your customers.

 

NPS score by brand 

Not all the brands you are selling are healthy for your business, but you can only find this out by seeing the NPS split by brands. The NPS score by brand shows you the brands you can count on or which ones you need to replace in the future.

 

NPS by Customer Attribute

You might try different discounts over time and some of them might bring you a huge net profit, but you will not see the sublayer. Clients react differently to different stimuli and you will want to find out the ideal discount where your customers are content and you can also gain a profit. The Customer attribute can be replaced as well with different gifts, free shipping thresholds or anything else you want to test. 

 

Chances to Place Next Order 

Making a customer place the second order is not enough to create a habit and create loyal customers. Customers that place the second order have 50% chances to place the next order, but if you convince them to buy 9 times, your chances will increase to over 80% to repeat their purchases. 

The take from this is to build a strategy for convincing your new customers to purchase several times until they get a natural behavior of repurchasing from you. 

 

Customer segments

Once your groups have been defined by RFM scoring, you will be able to export them and send them to other third parties such as e-mail marketing platforms, ad platforms or web personalization tools where you can apply different marketing strategies suitable for each group.

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Know, predict & accelerate your customers’ moves!

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Stay tuned for our next article next week where we continue to write about the RFM analysis!

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Mara Gavrilescu

Mara Gavrilescu

CROcodile noun [ C ] us /ˈkrɑk·əˌdɑɪl/ an ambitious and hard-working type of digital animal, passionate about human online behaviors with over 2 years experience in A/B testing, Website Strategy, and User Research who lives in a mystical place called Bucharest and spends her free time hula-hooping, traveling and hiking
Mara Gavrilescu

Mara Gavrilescu

CROcodile noun [ C ] us /ˈkrɑk·əˌdɑɪl/ an ambitious and hard-working type of digital animal, passionate about human online behaviors with over 2 years experience in A/B testing, Website Strategy, and User Research who lives in a mystical place called Bucharest and spends her free time hula-hooping, traveling and hiking

We’re a team of people that want to empower marketers around the world to create marketing campaigns that matter to consumers in a smart way. Meet us at the intersection of creativity, integrity, and development, and let us show you how to optimize your marketing.

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