4 ways to get the most out of customer lifetime value (CLV)
Strengthening relationships with your customers is the key to getting the most out of a customer's lifetime value.
In our last article, we defined what Customer Lifetime Value (CLV) is and explained the key to increasing this important metric across your retail business: improving your relationship with your customers.
In short, while you can improve CLV by increasing the dollar amount shoppers spend at your stores, lengthening and strengthening the relationship can be a more effective strategy. Loyalty provides long-term benefits, including a larger window of time for repeat purchases, but also brings you the benefit in this stat: after 30 months into a relationship with a brand, apparel shoppers purchased 67% more per order.
Better relationships mean both more frequent and higher-priced order averages. Imagine that.
So how can your retail business improve on your customer relationships to see these types of longevity results? Let’s examine 4 ways you can maximize your CLV.
1. Patch the holes: Identify churn via segmentation
The first step in solving your relationship problem is admitting you have a problem. At which point(s) in your marketing and sales process are you losing, aka churning, the majority of your customers? Figuring out your weakest link will help you address the sore-spot in your relationships.
Of course, defining “churn” in retail is not a simple task. If a shopper doesn’t come back in a month, is that person considered churned? Probably not. But that length of time between retail visits or purchases is different for every business. You will need to take averages of customer lifetimes to provide you with a baseline. In 2020, the average churn rate in general retail was around 24%. How does your brand’s churn rate stack up?
To track these sorts of metrics, it’s important to have a good CRM in place that automatically captures customer data, especially since different shoppers have different habits. A teenager will shop differently than someone in their 40s. Your CRM can segment out groups of similar shopper profiles so you can not only accurately find the points of churn for each group, but also deploy targeted marketing around each group to prevent churn.
For example, let’s say your CRM shows a steep drop-off in activity after a segment’s 3rd purchase. To address this point of churn, you can incentivize this group, and only this group, to come back for a 4th purchase with a 50% off coupon that’s too good to resist.
By improving your churn rate, you’ll extend the lifetime of your valuable customers and bolster your overall CLV.
2. Communicate: Get a personal dialogue going
While saying “communicate better!” is a no-brainer, the key syllable here is di in dialogue, which means 'two'. As in, engaging in communication should be a two-way street.
One of Endear’s most used and effective features is the ability for sales & marketing teams to manage multiple communications that have a true back-and-forth with each customer.
These personalized messages are incredibly effective, increasing customer engagement to 33% on average across our retail clients. And keeping engagement high provides a way to put great customer relationships at the forefront of a brand’s strategy in extending the lifetime of that shopper.
Besides personalized messaging via email or text, another method your business should consider is offering appointments. More and more retailers are using virtual appointments to provide high-levels of customer service with a hint of that old-fashioned personal shopper vibe that really works to increase satisfaction. Nordstrom, for example, allows customers to book virtual styling appointments among other services.
This type of truly personalized communication can make life-long fans of your brand.
3. Go beyond customer service: Get clienteling
Offering more personalized messaging to elevate a shopping experience in the previous section is just one part of the retail movement of Clienteling. This refers to efficiently using customer data to create intimate shopping experiences. With so many competitors and options both online and in physical spaces, clienteling is how your brand can establish a loyal and long relationship with your customers.
Virtual and in-personal appointments are great ways to offer a clienteling experience because of that “personal shopper” feel. Another method to consider that really focuses on higher CLV is providing the option to create personalized bundles.
BYOB, available as a Shopify app, is an example of a platform where users can create their own personalized bundles from your products. Not only does this type of service elevate the shopping experience to improve your customer’s relationship with your brand, but bundling increases the average order value of each purchase. That’s a double win for CLV right there!
There are many ways to offer clienteling to your customers, especially when it comes to reaching them wherever they are through omnichannel retail strategies. They all serve to help your sales associates push good relationships into becoming great ones, creating loyal customers, and extending the lifetime of their connection to your brand.
4. Build communities: Deputize affiliates
A single customer’s value isn’t just how much they spend or how often they shop. It also includes how much they evangelize your brand and bring in new shoppers. After all, if someone never spent a penny at your stores but brought in one new shopper every month, that person would have a high CLV without ever opening their wallet.
A great way to encourage this type of added value is to create a robust affiliate marketing program where your customers can earn a commission by bringing in new business.
But there are affiliate programs, and then there are affiliate programs. You know the ones. Lululemon. Yelp. PINK. Sephora. These brands don’t just have affiliates; they have brand ambassadors that are fiercely loyal and bring in a ton of business.
The engine that drives that level of evangelism is creating and fostering a real community. Your brand can activate your community through social media campaigns, in-store events, volunteering, and offering the right promotions. Take Maker’s Mark, for example, who will print your name on a physical barrel, host distillery events, test you with whisky quizzes, and send exclusive gifts. Their affiliates have a true affection for the brand due to all these perks, but especially because they are joining a vibrant community of fans to interact with.
Focus on providing your affiliates with a similar level of community. Your investment should show high ROI when these ambassadors increase their CLV.
Written byRobert Woo, Writer @ Endear
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