For great retailers, success isn’t earned with a single transaction—one transaction is only a win when it sets the ball rolling for more transactions like it and bigger baskets in the future. By the same token, missing out on a single sale is never just that—it can sap untold thousands of dollars in future business.
But how do you measure how much a customer is worth to your business over the long term? Customer lifetime value is a concept that measures how much money a satisfied customer is likely to spend with you over the course of your relationship. It considers the monetary value and frequency of a customer’s purchases so that you can target your marketing efforts and develop a deeper relationship with him or her.
For instance, if a customer typically spends $5 on a coffee order and visits your shop on average five days a week, that customer is roughly worth $1,000 a year to your business. Multiply the annual projected spend by the number of years they’re likely to use your services, and that’s your customer lifetime value (CLV).
But putting a number on a customers’ value isn’t even half the battle. Leading retailers are losing sleep finding ways to increase that number to get even more out of return shoppers. In this pursuit, they’re turning to new age technology to deliver on age-old tenets more effectively than ever.
Right product, right place, right time… every time
It’s no secret that the key to strong sales is to offer the right product in the right place at the right time. That’s retail 101.
But having a network of physical stores means a mountain of potential obstacles in your way to getting the product they want into customers’ hands. Throw in that consumers are savvier than ever, with more choices for where to buy what they want than ever, and it’s obvious why getting this table stakes task ain’t easy.
At CB4, we make it our beeswax to help the best retailers in their verticals—like Levi’s in apparel, Kum & Go in convenience, Wakefern in grocery—do just that.
We apply our cutting-edge AI and machine learning algorithms to work to help you use your own data in near-real-time. In doing so, you can spot and get rid of those pesky obstacles to giving shoppers at every location the products they want. (For more on how that works, here’s a short video).
When customers leave your store with their desired items in hand, they’ll continue to shop—and spend—with you in the long haul. When they can’t, they’ll take not only that sale but potentially the lifetime of their revenue, with them.
Good old customer service
Customer service is another cornerstone of a robust retail business. Providing unparalleled help and convenience compels customers to go out of their way to return to you. Whether you focus on providing outstanding products, competitive pricing, efficient delivery, or responsive customer care, mastering any of these areas builds a sense of loyalty between your business and your customers.
Retailers can develop a reputation for excellent service across a range of areas, from the speed of their checkout lines to the reliability of their mobile apps. Trader Joe’s has earned a cult-like following thanks to its heavy investment in the customer experience. No coincidence it’s also one of America’s best places to work. Meanwhile, Nordstrom’s legendary customer service emphasizes attentive salesmanship and a generous return policy.
No matter the method, one fundamental endures: It costs less to sell to existing customers than to acquire new ones, so investing in customer service can pay dividends for years to come.
Rewards & Loyalty Programs
Loyalty programs have moved beyond the modest punch card to keep shoppers coming back for more. Today’s best examples deliver value in a range of ways from freebies to discounts to exclusive promotions. Just ask the legions of REDcard-wielding shoppers saving 5% in the Target checkout line: loyalty programs are one of the most effective ways to keep customers coming back.
Whether it’s a branded credit card like Target’s, a premium program like Amazon Prime, or a points-based system like Nordstrom’s Nordy Club, retailers are engineering a plethora of ways to reward shoppers and make them feel appreciated. Meanwhile, mobile apps have created new opportunities to market incentives to regular customers. Starbucks’ app provides seamless ordering and payment as well as benefits from beverage refills to birthday freebies.
It’s a valuable investment: eight in 10 shoppers say they’re more likely to shop from a brand that offers a loyalty program. These incentives not only secure but enhance your customer lifetime value.
Stay in Touch
In a crowded marketplace, the savviest retailers have figured out how to harness technology to remain top of mind even after a customer leaves the store or logs off the site. Creating an emotional connection to your brand and maintaining that bond across a range of platforms helps keep your customer base engaged, even when they don’t intend to make an immediate purchase.
Retailers can do this through personalized email marketing and relevant social media posts. The most effective emails inform or entertain, in addition to issuing a call to action to make it easy or exciting for the customer to shop. These include discounts, freebies, and personal recommendations.
Building a strong community around your brand ensures continual customer engagement. Take, for example, Nike or Sephora. They don’t just sell athletic apparel or makeup; they sell entry into an aspirational lifestyle.
Nike’s Run Club inspires customers and builds community by helping customers connect with fellow runners in their city. This lends itself to content that helps customers enhance their lifestyle and athletic performance and allows Nike to tout its wares.
Sephora has built a global online community that connects beauty enthusiasts eager to discuss products, offer advice, and recommend purchases. In turn, Beauty Talk users create their own content by uploading pictures of themselves wearing Sephora products.
Make Repeat Purchases Easy
Forward-looking retailers know that they need to meet the customer where they are at every point in the shopping funnel, from quick and seamless deliveries to hassle-free returns.
Customer-centric return policies are key because they build goodwill and confidence, especially for purchases made online. Liberal return policies such as those from Zappos and Amazon may seem counterintuitive, but the benefits are outsized in increasing customer lifetime value. Every item a retailer lets a customer return could be paving the way for future purchases. That’s why some stores, like Nordstrom and Staples, will even accept items purchased from other retailers.
Many of these retailers encourage the likelihood of repeat purchases by asking customers to save their payment details for seamless future transactions. Amazon’s one-click “Buy Now” option removes the friction that could typically cause a customer to deliberate or postpone the purchase.
The Bottom Line on Customer Lifetime Value
Customer lifetime value measures the worth of an individual customer over the course of their relationship with your business. The costs of acquiring new customers outweigh the costs of maintaining your existing customers, so considering your customer lifetime value pays dividends throughout the lifecycle of your relationship.
Understanding how customers shop with you and engage with your business is crucial. According to an Econsultancy report, 76% of companies say they prioritize customer loyalty, but only one-third said that they track CLV as a key metric
As the pandemic unfolds, we’d like to help… even if you’re not a partner. CB4’s Lost Sales Calculator is the perfect place to start. It will help you ballpark how much new revenue you could gain by using CB4 to give customers more of what they want more of the time. If that piques your interest, why not get in touch? We can also run a free impact assessment to learn more about your business and help you capture demand-related opportunities in your stores as they arise and when they matter most.