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Know your Numbers – Customer Lifetime Value

March 12, 2015


ecommerce

Know Your Numbers –
Customer Lifetime Value

rare.io-smart-ecommerce-email-marketing-author-Rob-lane

Written by Rob Lane.

1. Overview

Customer Lifetime Value (CLV) is something we’re hearing more about these days. As marketing continues to shift from product-centric to customer-centric messaging, it’s natural that we look more closely at this type of metric.

CLV is defined as the revenue generated by a customer during his or her lifetime with your brand. It’s not just past purchases that are taken into account, but also future value. The formula below sums it up nicely.

CLV = FREQUENCY * VALUE * RETENTION

Notice the last factor is retention. That’s where you can make all the difference in how long a customer sticks around.

2. Know Your CLV

Health professionals say “know your numbers” when referring to good and bad cholesterol. The same applies to CLV. For example, if your average customer lifetime value is $100, and you’re spending $110 per customer on your marketing (acquisition and retention), then you need to make some changes!
How you interact with your customers directly affects CLV, so always know what your customers are worth to your business. Being informed helps you make better decisions about your marketing strategy.

3. It Starts With The First Purchase

When a prospect first becomes a customer, the CLV “clock” begins ticking. Data from our own customers shows the 7-14 day window after a first purchase presents your greatest opportunity to begin nurturing your new customer. Post-purchase communication has a big influence over CLV. This is what we refer to as keeping customers in the buying cycle – keep them as excited as they were at the moment of first purchase.

Below is an example of a very successful post-purchase follow-up mailout from one of our customers. It continues to be a direct driver of repeat orders.

4. How We Help Our Customers Increase CLV

The most direct way you can connect with customers is through email – but it’s best to focus on each individual customer to be truly effective.

That’s not to say there isn’t a time for a bulk email, but people like to be treated as the individuals they are. The better you are at doing so, the more likely you’ll build a loyal customer base.

We’re happy to say that many of our customers have seen notable increases in CLV through email sent with Rare. There are a few key reasons for this:

  • Rare email is highly personalized so each individual customer receives content and product recommendations tailored for them. This makes them far more likely to engage.
  • Email sent through Rare is fully responsive, so your email looks great and is fully functional on any device. There is less chance it gets deleted due to a poor mobile experience, and more chance someone comes back to it later for further action.
  • We deliver your email at a time when your customer is likely to open it, meaning they are also most receptive to reading it.

We know email is not all you do, so we’ve automated the send process. Send email on-event (after a 2nd purchase), or at a set time before a holiday. Email goes out automatically, and recommendations are inserted at send time. Automated email with the personal touch of a hand written note!

5. A Quick Look At CLV Within Rare.io

We’ve made CLV an important part of our visual segment builder. As you build segments the CLV numbers on the right hand side of the UI change to reflect the defined audience. See the value of your segment and decide whether or not to email them.


We present a number of important data points including orders, refunds, and the number of customers that accept marketing email. Offering you a more complete picture helps you plan your marketing strategy.

3. Conclusion

Remember, you are the biggest influencer over CLV, but we make it easier to build and retain a loyal customer base through personalized, predictive, responsive email.
Rare.io makes it easy to start using automated email campaigns for common challenges like: Welcome Series, Abandoned Carts, Order Follow-up emails and more! You can learn more about our powerful email marketing automation features here or go ahead and get started right away by using Rare.io for FREE.

Try Rare.io FREE!

And if you’re one of the thousands of merchants who are already using Rare’s Smart Email Marketing software and want to see how our Customer Success Team can work with your brand to grow your revenue – feel free to book a call at your convenience here.

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