Customer Lifetime Value in eCommerce | How You Can Do Better

“Standing out from the crowd” is arguably the most common goal for businesses across any and every industry. But we think it’s safe to say that the pressure to compete has been especially hard on any store that sells online.

After all, eCommerce is expected to make up a whopping 37.5% of the UK’s retail market by the end of 2024.1 How are you supposed to set yourself apart from the inevitably huge number of businesses behind that growth? 

The simple answer is to appeal to the factor that makes your business successful in the first place: your customers.

Having a robust customer experience strategy may be easier said than done, but the value you get out of having one makes it well worth the effort. And we’re here to help. 

Today we’re going to dissect the all-important customer experience metric, Customer Lifetime Value (CLV). From what it is, why it’s so critical, and what you can do to improve yours, we cover everything you need to know to start seeing greater results.

Suggested reading: Improving your CLV is one of many super valuable ways you can start appealing to customers — want to know the rest? Check out our Pocket Guide to Customer Service Solutions!

What is Customer Lifetime Value in eCommerce?

CLV predicts the net profit a customer will generate in their entire relationship with your business. Specifically, it will tell you:

  • What’s working well for your business.
  • Who your most loyal customers are.
  • Which products or services are most profitable.

And if you neglect your CLV, you risk: 

  • Missing potential issues with your brand, product or service. 
  • Failing to notice changes in customer spending habits.
  • Overlooking opportunities to strengthen your brand.  

CLV is incredibly important for two major reasons:

  1. It gives you an overview of the current and future performance of your business as a whole. 
  2. It helps you find gaps and opportunities related to customer retention.

Remember, while it’s always valuable to attract new customers, it’s doubly valuable to retain your existing buyers as well. Just a 5% rise in retention can increase your business revenue by 25-95%!2

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How to calculate your customer lifetime value

The formula for calculating CLV involves a number of other key metrics. Here it is:

Average Purchase Value x Average Purchase Frequency Rate x Average Customer Lifespan

Let’s break down what those are:

MetricWhat it measuresHow to calculate it
Average Purchase Value (APV)The average amount spent each time a customer makes a purchase.Total Revenue Total Number of Purchases
Average Purchase Frequency Rate (APFR)How often, on average, a customer makes a purchase.Total Number of PurchasesTotal Number of Unique Customers
Average Customer Lifespan (ACL)The average duration a customer continues to purchase from your business.Total Time Customers Remain ActiveTotal Number of Customers

Four strategies for improving your eCommerce CLV

With all of the above basics on CLV covered, let’s get into the ways you can start improving yours. 

  1. Constant, reliable support

You need to meet your customers where they are, proactively and expertly. This is where the importance of providing high-quality customer service cannot be overstated. 93% of customers are more likely to buy from a business that offers excellent customer service.3

While that includes filling obvious requirements like expert agents and on-demand support, you also need to ensure that your customer service function is more of a profit maker than a cost on your business. 

Because the eCommerce space can see a lot of peaks and troughs in demand almost instantly, consider scalable models that can easily adjust to these shifts so you’re never paying too much or too little for support.

Even better, look to an outsourced eCommerce customer service outsourcing partner that can help match you to the best agents possible, with a pay-as-you-go pricing model that works for your business. 

  1. Loyalty programs

Loyalty programs are a powerful way to boost CLV because they basically act as rewards for your customers, encouraging them to keep coming back and incentivising potential buyers to join in.

When implementing loyalty programs, it’s crucial to understand your customer base and design a program that resonates with them, whether they’re motivated by discounts, exclusive access, or other benefits. One good way of retrieving this feedback is through using feedback forms and customer reviews to get that information firsthand. 

However, remember that that information shouldn’t just get fed into your loyalty campaigns. Make sure to use that data to inform how you personalise everything from marketing emails to customer service — and have strategies in place to make sure that they can be easily amended based on said feedback.

  1. Personalisation and engagement

60% of UK customers say they’re more likely to become repeat customers if their shopping experience is personalised.4 Using customers’ data (including their demographics, feedback, etc.) is the best approach to personalise their eCommerce shopping experience.

Take how Love to Dream, a brand that offers baby and toddler sleepwear and sleep solutions, decided to approach their customer service after a regional expansion. With Odondo’s help, we were able to match them with agents that had parenting and childcare experience, so that customers could get support from people who could relate to their circumstances. 

The end result was a happy base of new and existing customers, plus solid ground to continue growing their business across Europe.

  1. Quality and value proposition

The quality of your products and the value you offer are obviously important to retaining customers and increasing CLV. 

Remember: it’s not just about the product itself, but the entire experience surrounding it. High-quality products and services lead to higher customer satisfaction, which in turn fosters loyalty. Customers are more likely to recommend your brand to others if they believe in the quality and value of your offerings. Plus, quality products mean fewer returns and complaints, saving costs and maintaining a positive brand image. 

To enhance your value proposition, feedback again plays a huge role in improving your products and services. Clear communication is key to ensuring your customers understand the value of what you’re offering and what sets you apart from competitors. You should also consider how additional services, like exceptional customer support or an engaging online experience, add value for your customers.

Suggested reading: For more tips, check out our 4 Customer Engagement Strategies for eCommerce Success!

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Enhance your customer experiences with Odondo

While “standing out from the crowd” isn’t a new aim for most eCommerce businesses, it’s still easier said than done without some help. Especially in the case of building an outstanding customer service function.

With a sea of outsourcing partners available, finding a trusted partner can’t be stressed enough. Outsourcing to an experienced partner will massively improve your customer service and improve your CLV! But outsource to the wrong partner and you run the risk of plugging holes instead of sailing into the sunset.

At Odondo, we strive to offer the best possible packages for our clients so that they can deliver greater customer service and rise above the competition. From pay-as-you-go models to British-based agents skilled in various industries, we guarantee that your customers will always be speaking to highly qualified agents who know how to get the job done.

Our services aren’t just catered to helping you improve your CLV. They’re about giving you consistent support that you can rely on, taking care of the grunt work so that you can focus on the bigger picture.

If you want to find out how we can help your business, just request a quote and we’ll be in touch!

1   UK Retail Report, E-Commerce Trends, and Online Shopping Statistics 2023

Here’s Why Customer Retention is So Important for ROI, Customer Loyalty, and Growth

3 107 Customer Service Statistics and Facts You Shouldn’t Ignore

4 Personalisation takes on new urgency as consumer expectations outpace experiences – Ecommerce Age

Aamir Baloch

Aamir is one of the Co-Founders at Odondo, where he obsesses over the details to deliver a strong and compelling proposition for each of his clients.

Prior to Odondo, he was CTO at one of the UK's largest price comparison websites, with contact centres in the UK and India. In his spare time, he loves reading, politics, tennis, and playing the piano (badly).

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