Ecommerce is an industry that is changing every minute, and online businesses need to adapt quickly to these trends, in order to stay afloat. Certain key metrics can be used to measure the success of a business. These are important indicators designed to determine how well a business is doing, and whether it is profitable or not. These indicators include:
1) Cost of Marketing to Acquire Each Customer (CPA)
2) Lifetime Value (LTV)
3) Gross Margin
5) Profits One of these indicators, the Lifetime Value of LTV, is discussed below, along with some suggestions on how to increase it.
Lifetime Value refers to the projected revenue that a customer will generate during their lifetime. It is one of the simplest metrics to calculate, however, it involves many variables.
The basic formula used to calculate LTV is
(Average Order Value) x (Total No. of Repeat Sales) x (Average Retention Period).
Lifetime Value is an important metric to keep track of because:
Once you know how to calculate the LTV for your business, you need to determine how to increase it and leverage its potential.
A newsletter is a preferred marketing tool because it gives your brand a higher recall value. This supported with regular emails and updates about your store will surely register your brand name in the customer’s mind. However, emails should not be intrusive in any manner. Rather, they should be eye-catchy and offer something of value to the customer. You should make them worth reading. Sending out periodic e-newsletters to a target audience would help attract the right customers, as compared to sending bulk emails to random mailing lists. In addition, you need to find the right balance between sending too many or too few e-mails a month, according to your business and its customers.
Taking brand value and recognition to the next level entails going a step further. It involves using a host of other media and social media including Twitter, Facebook, Instagram and Pinterest. When the customer sees ‘more of you’ everywhere, the customer lifetime value is sure to go up. As your brand name sinks into the customers’ minds, it would definitely influence their browsing and buying.
When you get a customer to subscribe to your store, you would gain insight into a customer and generate a frequent revenue stream. This creates a more predictable lifetime value and leads to greater profits. In the process, you are also making the customer more valuable. Customers who take up a subscription get better deals, exclusive benefits, and are likely to act as promoters for your brand.
Once you create a loyal customer base, it becomes easier for you to upsell and cross-sell to them, as opposed to getting a new customer. As Marketing Metrics calculates, the probability of selling a product or service to a new customer is only 5%-20%, while that of selling the same to an existing customer increases to a significant 60%-70%. Even if your sales were moving up steadily, if you incorporate the practice of upselling, they would increase at a much higher rate.
If customers log on to your website, you should be able to view a homepage designed according to their preferences. This kind of personalization is enough to build trust and loyalty among existing customers. In fact, the E-consultancy Realities of Online Personalization Report found that 94% of businesses believe that personalization is critical to current and future success.
Online shoppers look for more than good deals on products. Aspects such as shipping and returns may seem insignificant. Adding the ‘Free’ label to them could witness your sales going up. Free shipping and easy returns add a great factor of convenience to shopping online and go a long way in winning new customers as well as retaining existing customers. Other techniques include adding a ‘free gift’ for purchases above a certain amount or providing exclusive deals on birthdays, anniversaries.
Improving customer service is imperative for the progress of any business. Customer service is the only way your customers get to interact with you, while you gain insight into customer behavior and gather important feedback. The better your customer service, the happier your customers will be, and the higher will be their retention rate. Follow the best practices of customer service such as acknowledgment, empathy, responsiveness, promptness, patience, humbleness, and knowledge and you are sure to gain the confidence of customers.
Increasing the customer lifetime value would surely improve customer satisfaction while generating higher sales for you. Taking the right measures to provide a WOW experience for your existing as well as prospective buyers will help retain customers and thus increase the chances of higher returns for your business. Having the right kind of eCommerce support will go a long way in contributing to this.