Every business would prefer to have customers who purchase over and over from them. If your sales history is dotted majorly with one-time customers, you are doing something gravely wrong. You should always have several customers who regularly purchase from you. Most successful businesses would be privy to this information. This is where customer lifetime value comes into place.
What is Customer Lifetime Value (CLV)?
It denotes the total amount that a single customer has spent on your company’s products or services, over the period of their lifetime. If you have a higher CLV, it means that your customers get more value from your offerings. This will automatically result in a fatter bottom line and they will keep offering you their wallets.
Why Must Shopify Stores Focus on Increasing CLV?
The chances of your existing customer purchasing from you are as high as 60% while the same for a new customer is anywhere from 5 to 20 percent. Having loyal customers is the best thing that businesses can ask for themselves.
Let’s look at a few reasons why increasing CLV is crucial
- Your outreach spending declines since you have a sea of customers with you
- Customers who have been with you for years will keep sending word-of-mouth recommended clients your way
- You can convert loyal customers into brand ambassadors
- No necessity to offer deep discounts since existing customers trust your offering and are ready to invest because of the value you offer
Loyalty programs and gift cards are a great way to incentivize customers to stay engaged with your brand. According to a survey by Brand Keys Customer Loyalty Engagement Index, even a 7% increase in brand loyalty increases the CLV of each client by 85%. Gift cards and loyalty program has what it takes to increase loyalty by virtue of its benefits.
They Encourage Repeat Purchases:
Loyalty demands purchasing consistency and this is where gift cards and loyalty programs play a crucial role. Customers who repeatedly buy from you either accrue points on the loyalty program or get a gift card with store credit. The incentives can be offered in a number of ways.
Since gift cards are already paid for, it reduces the decision-making time of the customers. This results in higher spending and results in impulse buys.
When a customer ceases to be a part of a loyalty program, they might end up losing access to an exclusive club of like-minded people, lose their points, or be eligible for perks. If you can offer an attractive loyalty program with the right incentives, the perks can be something that makes your customers keep coming back to you again and again.
They Increase Order Value:
A report by Accenture says that customer loyalty program members are more likely to spend more than non-members. Here’s proof of it with the world’s largest eCommerce business as an example. A survey said that Amazon’s Prime members spend an average of $1400 against $600 by non-Prime members. This clearly shows that loyalty program members are heavily invested in your brand.
By letting points accrue with each spending, you encourage the customers to purchase more for bigger and better perks. Therefore, the order value increases for you and the customer. For example, let’s look at the case of a customer who stands to get an attractive perk that is above a particular threshold. She finds herself short of the number by a reasonable amount. What will she do? She is more likely to purchase extra items to be eligible for the perk. By doing so, she gets the perk and the eCommerce store manages to drum up more business for itself.
There is an “Emotional” Attachment:
A higher loyalty rate doesn’t translate into a higher CLV alone, but it also increases your referral rate. How? According to research by Motista, loyal customers have an emotional connection with the brand. The research says that 71% of such customers recommend the brand to others.
The Perks Make Them Come Back:
The value on the gift card when intended as a gift or as a loyalty program perk makes your customers keep purchasing from you. All you must ensure is that the reward program is non-transferrable, an act that customers wouldn’t mind. It is one more opportunity for you to make them enjoy your offerings.
They Offer Personalization:
Nothing is sweeter than the sound of your own name. The same goes in the virtual world as well. People love themselves. Gift cards and loyalty programs allow you to include personalization by letting you add anything that customers want. According to Adobe Personalization Survey, 89% of marketers see a positive ROI when they incorporate personalization into their campaigns. The average customer these days wants a personalized experience. It is possible to offer numerous personalization options with gift cards and loyalty programs.
Incentivizes at Every Stage of the Customer Journey:
The best thing about gift cards or loyalty programs is that you can use them to incentivize customers at every stage of their journey. It is possible to create an environment where your customers expect you to delight them occasionally. The incentives can be used to create a strong relationship with the customers. You can assign different perks for different stages.
Major Challenges to Scaling CLV:
Let’s look at some of the common challenges that businesses face when trying to scale CLV
- Poorly chosen incentives for the loyalty program
- Not using an effective customer loyalty program
- Lack of automation in the program
- Customers aren’t receiving the promised perks
- Unattractive gift card design
- Lack of personalization in the loyalty program and gift card
- Inability to get the leadership buy-in to implement best practices
For your brand to have a high CLV, you must give enough reasons for your customers to keep shopping from you. You must create an automated system where customers can avail of the perks associated with gift cards and loyalty program. Choosing the right loyalty program is going to be a huge bonus in your efforts to increase CLV. Why? It automates the entire loyalty program exercise. You will be able to generate the kind of results that you want for your business without having to build a loyalty program from scratch.
If you are looking to superpower your Shopify store with an all-in-one promotion program that includes gift cards, loyalty programs, store credits, referral programs, and coupons, you have come to the right place. 99minds can be your go-to customer engagement and retention platform. Get in touch with us to learn more about how we can be of help.