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Proven email strategies to increase the customer lifetime value for your e-commerce business
Written by
Tejas Pitkar
Tejas Pitkar
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Proven email strategies to increase the customer lifetime value for your e-commerce business


During the pandemic crisis of 2020, the US E-commerce industry grew by 44% in sales, the highest over two decades. Consumers spent almost $860bn on online shopping. Growth in E-commerce became the driving force for all the gains from retail sales in the US for 2020.

This year, the trend has continued with a 39% increase in E-commerce sales year-on-year compared to Q1 2020. It reflects the tremendous growth of E-commerce, as consumers get comfortable purchasing online and retailers fine-tune their operations for quick and efficient delivery.

The majority of businesses and consumers have joined the online bandwagon. The marketplace has become crowded and the competition tougher. Acquiring new customers and retaining them is becoming increasingly difficult for E-commerce businesses.

Since the last year, businesses are prioritizing customer retention over acquisition. According to a study, it costs 5 times more to gain a new customer than it takes to retain one.

High acquisition cost and a low customer lifetime value (CLV) are the toughest challenges today. We will discuss how to use email marketing to boost your CLV in this post.

But before that…



How can a high CLV impact your E-commerce business?



Increasing CLV should be at the centre of every online business’s growth strategy.

E-commerce marketers are obsessed with terms like AOV (Average Order Value), CV (Customer Value), and APFR (Average Purchase Frequency Rate): these help calculate the average CLV.


A high CLV equates to high ROI and customer loyalty. In other words, more customers will stay with you for a longer time.

It also means that your products have found a market fit, and your customers simply love them.


Since we at Netcore Cloud are big fans of emails, we will show you ways to increase CLV for your online business using email marketing.

Email marketing is a direct channel to understand your customers and what they need from you. You can use your mailing list to improve customer CLV and make a difference in your company’s bottom line.

Here are some ways that CLV directly impacts your business:

* A high CLV leads to a higher profit margin due to repeat purchases and greater ROI.
* Repeat purchases from existing customers lead to a healthy recurring revenue that reduces part of your costs.
* With the assurance of recurring revenue, you can re-invest the profits into expansion, development of new products, etc.
* CLV is a good indicator of the financial impact of your marketing campaigns. 

* A high CLV means that your customers love your products/service and they are loyal to your brand.

Prepare a CLV strategy as if it’s a long marathon rather than a short sprint.

But how do you calculate it?



How to calculate CLV?



CLV denotes the average amount of money spent by your customers throughout the lifetime of their relationship with your e-store.

Example: As an online e-fashion store, you spent $10 in acquiring a new customer; he or she buys 5 pairs of shoes every year, over the next 10 years. With a $15 gross profit on each transaction, you earn $75 each year, and $750 over a decade. Now subtract the cost of acquisition from your profit i.e., $750-$10=$740. That’s your customer lifetime value.

The generic formula to calculate CLV with a predictive approach is as follows:

Customer value = Average order value of the single customer / Average frequency of purchases

Average customer life span = Sum of all customers’ retention spans / Number of all customers
CLV = Customer value X Average customer life span.

If you use an ESP to send your emails, they should be able to help you determine your average CLV.

Now that you know how to calculate it, how do you improve on it? It’s simple: make customers buy more, buy often, and be with you longer.

Let’s check out 6 strategies to increase the CLV for your E-commerce business and boost brand loyalty.


1. Segment your list based on RFM value



It’s a common practice for email marketers to segment their mailing lists into active and inactive customers. Segmentation is done based on past engagement, purchase history, demographics, and variable preferences.

We suggest you segment a level deeper: divide your list according to Recency, Frequency, and Monetary value aka R-F-M.

R-F-M enables you to organize subscribers from the most profitable to the least profitable.


Source: Crealytics

Example: Sally has recently purchased some products from your E-store. Here’s a breakdown of her R-F-M value.

Recency refers to Sally’s recent purchase history. A customer who has purchased recently is more likely to make a repeat purchase than someone who hasn’t purchased yet.

Frequency refers to how many times she has purchased in a given period. Active customers who have made frequent purchases will continue to do so rather than someone who rarely purchases.

– Monetary refers to the amount of money spent by Sally on your products. A customer with a high purchase value is likely to return than a customer with a lower purchase value.

Such a hyper-targeted approach provides you a holistic view of the average CLV of your customers. According to the infographic above, the aim should be to convert the not-profitable customers to very profitable customers. In addition, you need to retain profitable and very profitable customers.

Get started on it with an analytical approach and purchase history from your website. With this strategy, you will gradually witness an improvement in CLV.


2. Use post-purchase emails to sell more



For an E-commerce business, transactional emails like order and shipping confirmation are important to send. These emails have a higher open rate than your promotional campaigns. Naturally, your consumers are curious to know more about their order and expected delivery times.

Here’s a surprising statistic: Order confirmation emails have an average open rate of 70.9%, four times more than your promotional emails!

Post-purchase emails are a great opportunity to upsell complementary products to your customers. Incentivize the customers to purchase more with attractive deals in your shipping confirmation emails.

You can provide such nudges to increase additional purchases on related products. They improve the repeat purchasing pattern of your customers and add to the CLV.

This shipping confirmation email from Dollar shave club for their monthly subscription box goes the extra mile in promoting complementary products. It prompts the customer to “toss in” extra grooming products for a small price.


Source: Reallygoodemails


3. Upgrade your loyalty experience



There’s nothing better than giving a loyalty membership to your customers to make them feel special with exclusive access to products and services. 

A loyalty membership should offer perks to your customers to keep purchasing.

The use of human psychology in marketing creates a behavior pattern in the customers; they keep making purchases from your business in return for the perks.

Example: As an E-grocery store marketer, you can add loyalty points for all your customers’ purchases. When enough points accumulate, you can offer to redeem them with special services like same-day delivery, half-price discounts, early bird access to limited products, and more.

Loyalty programs are a simple way to reward and increase repeat purchases of your loyal customers and improve their lifetime value.

Read more here on encouraging repeat purchases for your E-commerce store.

The campaign from Loeffler Randall promotes their loyalty program and allows customers to earn even more rewards. The offer of 250 exclusive bonus points is attractive, while the limited-time rider creates an urgency to buy.



Source: Pinterest


4. Hyper-personalize your emails



We live in an era where hyper-personalized messaging is all the rage.

Expect your customers to stay only if the deals resonate with them: collect relevant information during sign-up, segment based on past interaction, and offer relevant products to each customer.

Example:

As an E-grocery store, you will have segments for the health-conscious, vegans, fruit lovers, and others. Create automated campaigns for triggering respective content to each of these segments. Make your customers feel like you know what they need.

Your messaging should create a ‘wow’ moment that adds to their experience.

Besides being personal, you also need to have a goal for your messaging. Whether you wish to communicate about your latest sale, growing registered users on the app, or new cool collaborations on website products, have a goal for creating the email.

Carefully thought-out emails make your customers feel at one with your brand. So, get personal and get specific.

The personalized campaign from Forever 21 provides a 20% discount on the products browsed by their customer. Personalization strengthens customer experiences by sending the right content to the right person at the right time.



Source: Reallygoodemails



5. Follow up with automated replenishment



In these pandemic times, automated replenishment emails are a powerful tool to get repeat orders.

Be it new customers or existing, automated reminder emails based on customer behavior data lead to repeat orders.

With the current pandemic era we live in, your customers will appreciate your replenishment emails on essential items, supplements, health care needs, etc.

Here’s another surprising statistic: According to Ometria, replenishment emails have an average open rate of 50-60% and an average click rate of 40-50%. That’s a high level of engagement!

Example: When a customer buys hand-wash liquid from your store, note the quantity, date, and purchase pattern. If they have bought enough for 30 days, trigger a replenishment email around day 25 to remind a re-purchase.

Automated reminder emails are a golden opportunity for your brand to generate recurring revenue.

This campaign by Drugstore is the perfect example of an effective replenishment email that appeals to a customer’s need for practical products. The casual question of “running low” gets a customer’s attention and urges them to re-order before they run out of stock. 



Source: SaleCycle



6. Engage smartly using AI-optimized campaigns



Anytime marketers talk about increasing customers’ lifetime value, improving customer retention is a prime consideration.

Throughout your email journey, you must have crafted some beautiful campaigns with engaging subject lines, attractive deals, and purposeful content. They might have performed well for your business.

So why not duplicate them and get similar results every time?

By creating emails similar to your top-performing campaigns, you increase the probability of boosting conversions with every send.

So how do you go about digging through tons of data to get these customer insights? Here’s where Raman – our AI assistant can come in handy.

Raman will reduce these time-consuming tasks to seconds!  It provides on-demand insights on your customer behavior data and gives real-time results.

Powered by artificial intelligence algorithms, Raman optimizes every customer engagement from start to finish. Whether you need to send off emails, create personalized online boutiques, or analyze your metrics, Raman will be there for you every step of the way.

Use AI-powered technologies to build and maintain strong relationships with your customers right from the first interaction.

Similar to the example provided, your AI assistant should be able to point out which subject lines have gained engagement in your sending history and which keywords can provide better performance on your next campaign.   


Summing it up



Running a growing E-commerce business means increasing CLV and reducing churn.

Improving CLV starts with your first interaction, i.e., welcome email, and goes right up to your latest interaction. Your retention and optimization efforts should be focused on every stage of the customer journey.

Use the above tactics to build a stable foundation for your E-commerce email program. Some tips to prepare your CLV campaign checklist include:

– Segment customers according to purchase value to improve your order value
– Use post-purchase emails to upsell and cross-sell relevant products
– Upgrade your loyalty program to offer exclusive services to the best customers
– Hyper-personalize your emails to resonate with your subscribers
– Use automated reminder emails to get repeat purchases
– Use AI to get customer insights and smartly replicate offers

If you haven’t already, we invite you to take our Customer engagement platform for a spin to experience our marketing features in real-time!

#fortheloveofemails

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