Have you been struggling to boost the growth of your online store? We have some effective strategies to help you overcome obstacles and reach long-term expansion. Based on studies, nearly 98% of visitors do not make a purchase during their first visit to a website, and only 5.2% of traffic is converted.
When it comes to raising revenue for an e-commerce business, customer lifetime value is always one of the main factors that businesses should focus on. It is a crucial factor for every merchant who has been seeking long-term expansion since CLV represents the total value that a business can expect from a single customer throughout their entire relationship with the company. To ensure long-term customer engagement, two of the most effective strategies to maximize the retention rate are loyalty programs and retargeting campaigns.
Why Focusing on Customer Lifetime Value is Important?
Let’s explore the importance of focusing on customer lifetime value (CLTV):
1. Measures Marketing Effectiveness
Measuring CLV helps elevate the effectiveness of your marketing strategies by allowing you to allocate your budget efficiently. You can focus on the campaigns that drive the most traffic to your store, which in turn reduces acquisition costs and ensures you’re spending on the tools that generate the highest profit.
2. Improves Customer Retention
A higher CLV indicates stronger loyalty to your business. Focusing on strategies that enhance customers satisfaction, such as implementing loyalty programs and improving customer service systems, will ultimately boost retention rates and generate long-term profit.
3. Identifies Profitable Customer Segments
Analyzing CLV helps you segment your target audience and create more effective retargeting campaigns and upsell strategies, which in turn lead to a higher repurchase rate. Customers are more likely to add products closely aligned with their shopping preferences to their cart. As a result, careful customer segmentation becomes essential for boosting long-term CLV.
How to Set Up an Ideal Loyalty Program:
A well-designed loyalty program can greatly enhance the shopping experience, especially when it offers a membership plan with extra benefits as customers make more purchases. Establishing a comprehensive loyalty program with multiple tiers and clear criteria can help customers stay engaged with your brand in the long term. These programs allow customers to earn points, discounts, and benefits such as free products, exclusive perks, or early access to sales, increasing their engagement with your brand and boosting the likelihood of repeat purchases, ultimately supporting your business's growth.
Compared to regular loyalty programs, multi-tier programs offer a wider range of benefits, such as:
- Better structure: Customers are segmented into different tiers (bronze, silver, gold, platinum), allowing for more targeted retargeting campaigns.
- Various rewards: Customers receive exclusive rewards based on their tier level.
Let's look at the example of the well-known electronics brand Logitech. To encourage repeat purchases and boost retention for long-term growth, Logitech ensures that customers not only receive the best products but also excellent after-sales service. Their goal is to maintain a loyal customer base and strengthen customer loyalty. As a result, establishing a multi-tier loyalty program became their primary strategy to achieve this.
What kind of progress have they made after implementing the loyalty program? According to data collected from an interview with Logitech's marketing manager, they successfully generated approximately 30% more revenue, along with a significant increase in new membership sign-ups. This example demonstrates the substantial growth that a well-structured loyalty program can bring to a business.
Another example comes from Smoosy, a premier online store in Taiwan that sells frozen fruit packages. Initially, they aimed to increase repeat purchase rates and customer retention. To achieve this, they launched a comprehensive loyalty program through the Ako Loyalty app, featuring personalized recommendations, diverse point-earning opportunities, and automated systems. They also established clear tiers based on the number of purchases customers made, offering exclusive benefits at each tier. After implementing the loyalty program, Smoosy saw a significant improvement in customer retention rates and overall customer satisfaction.
How to Set Up an Ideal Retargeting Campaign
An effective retargeting campaign can help bring back visitors who have recently engaged with your store, whether by clicking on products or abandoning items in their shopping cart. Have you ever felt like someone is watching your browsing history because you keep seeing ads for products you left in your cart? That’s the power of retargeting campaigns. These campaigns "follow" your audience and re-engage them, turning one-time viewers into long-term customers. When combined with loyalty programs, retargeting campaigns can significantly boost customer lifetime value (CLV).
Here’s how to effectively set up a retargeting campaign for your store:
Identify Your Target Audience
First, determine who you are targeting and what kind of relationship they already have with your brand. If you're targeting customers who abandoned their carts, providing enticing information about those products can be highly effective. On the other hand, if you're targeting visitors who browsed your website without placing an order, offering a discount through an email (EDM) can help capture their attention. It’s crucial to align your targeting with the message so that you’re providing the right information to guide your audience to the next step of their buyer's journey.
Klaviyo allows stores to automatically send marketing messages to their target audience and show them the latest news of the products, marketing campaigns, and exclusive discounts. With its help, businesses could easily help businesses easily retain customer attention and generate higher chances for repeat purchases.
Design Eye-Catching Content to Attract Customers
Creating eye-catching content is key to attracting more customers to your business. Make sure to highlight your brand story and develop engaging concepts around your products. When running retargeting ads, continuously test different styles and analyze which ones resonate most with your audience. This way, you can ensure that your budget is allocated to the campaigns that deliver the highest efficiency.
Refine Your Ads with A/B Testing Insights
Finally, optimize your content after launching a few ads. One of the most efficient ways to test your creatives and different variables is by using Facebook's A/B testing feature. By continuously monitoring your ads' performance and making data-driven adjustments, you can turn off the low-performing ads and focus on what works best among the top performers.
To maximize long-term CLTV for your business, effectively combining data from loyalty programs and using it strategically is essential. Let’s explore the following aspects of how it works:
- Generate Personalized Retargeting: Use data collected from loyalty programs to create personalized retargeting campaigns. For example, if a customer frequently purchases a specific product, retarget them with ads for similar products or related accessories to maintain their interest in your brand.
- Exclusive Offers: Reward your loyal customers with exclusive offers through retargeting ads, such as special discounts, early access to sales, or free shipping.
- Re-engagement: Target customers who haven’t made a purchase in a while by sending personalized messages and offers to remind them about your brand.
- Cross-Selling and Upselling: Use retargeting campaigns to promote complementary products or higher-value items to your loyalty program members, encouraging them to place more orders. The Shopify app such as UpPromote could help businesses easily set up upselling events to landing pages, boosting the general conversion rate.
- Cart Abandonment: Cart abandonment is one of the most common challenges for e-commerce businesses. However, it can be overcome with retargeting strategies. For instance, global fashion retailer ASOS significantly reduced its cart abandonment rate and increased conversions by sending emails and retargeting ads featuring abandoned items across social media channels.
By leveraging these retargeting tactics, businesses can encourage their target audience to complete purchases, ultimately enhancing CLTV and boosting long-term conversion rates.
Establish an Ideal Customer Service System
To keep customers engaged with your brand, ensure they sign up for a membership first. Offering a promo code for an exclusive discount on their first purchase can significantly increase sign-up rates. Additionally, sending SMS and email marketing messages can help maintain members' interest in the brand and encourage further engagement.
For example, the famous designer shoe brand Steve Madden successfully improved its retention rate by interacting with the customer service app Gorgias. Let’s take a look at the following aspects of how it works:
- Automated responses: The integration of an AI chatbot, allows the customer service team to focus on more complex issues and reduce the responding time.
- Personalized support: The platform allows agents access through customer purchase history and their preferences, which helps them generate more tailored support for customers.
- Real-world impact: By offering instant engagement to help with customers’ issues and personalized content, Steve Madden has seen a 19% increase in revenue in the first quarter of 2024.
Conclusion
Combining loyalty programs and retargeting campaigns is an efficient way to boost your store’s customer lifetime value (CLV). This strategy leverages data-driven insights from loyalty members to make marketing campaigns more cost-effective and efficient, while also targeting one-time users and encouraging their return. By implementing these tactics, businesses can foster deeper relationships with customers, leading to sustained growth and long-term profitability in the e-commerce space.