Customer Lifetime Value (CLV) is a concept that expresses the value of a customer for an e-shop throughout its entire life cycle, i.e. from the first visit to the e-shop until the end of the cooperation. Basically, it’s about how much a customer spends over the course of their lifetime as an e-commerce customer.
CLV is calculated as the sum of total customer purchases and sales profits, less customer acquisition costs and customer retention costs. This indicator can vary according to various factors such as average customer lifetime value, average number of purchases per period, average order price, etc.
For e-tailers, CLV is a key indicator because it helps determine how much they should invest in marketing and advertising to attract new customers, as well as how much they should invest in retaining existing customers. Most e-shops nowadays know that retaining existing customers is much more efficient and cost-effective than acquiring new customers, so they try to invest in various loyalty programs, discount promotions and other activities to retain customers.
An example of an e-shop that is very well oriented towards CLV is Amazon. Amazon has a powerful algorithm that tracks customers’ shopping behaviour and uses this data to recommend products that might be of interest to them. In this way, they try to retain customers and bring them new products that might be of interest to them. Another example is the Zappos e-shop, which focuses on creating strong customer relationships. Zappos has a very friendly and professional approach to its customers and strives to provide them with the best possible service, resulting in customers becoming loyal and repeat buyers. Zappos also offers various benefits to its customers such as fast and free shipping, easy returns, 24/7 customer support and loyalty programs.
Another example is the Sephora e-shop, which focuses on personalisation and customer interaction. Sephora allows customers to create their own profile and recommends products based on their shopping behavior and preferences. Sephora also offers customers the opportunity to access special promotions and offers and offers them shopping points that they can use for discounts on future purchases.
All of these examples show how important it is for e-tailers to focus on lifetime customer value and invest in loyalty programs and marketing strategies that retain customers and drive repeat purchases. If an e-commerce store can provide a positive customer experience and fully relevant service, they will likely return and spend more over their lifecycle as a customer.
It is crucial for e-shops to offer their customers not only quality products, but also a positive shopping experience and loyalty programs that motivate customers to make repeat purchases. Loyalty programs can be a great way for e-tailers to increase customer loyalty and lifetime customer value.
When creating a loyalty program, it is important to take into account customer preferences and offer them added value that they will be willing to earn for their e-commerce purchases. Loyalty programmes should be simple, easy to understand and accessible to all customers, whether new or returning.
One example of a loyalty program could be a points system where customers earn points for each purchase, which they can later use for discounts or other benefits. Another option is repeat purchase programs that offer discounts or special benefits for repeat customers.
It is also important for e-shops to communicate regularly with their customers and inform them about news, promotions and benefits offered to them. This can be done via newsletters, social media or mobile apps.
Loyalty programs can be beneficial for e-tailers both in terms of customer loyalty and in terms of revenue growth and customer lifetime value. E-shops should take advantage of every opportunity to retain and motivate customers to make repeat purchases and offer them an excellent customer experience.