What is LTV and why is it important?

29/08/16

LTV or lifetime value is a business metric that estimates the net income of the life of each client. E-commerces strive to have a high LTV, which is an indicator of customer experience quality. That way, the lower the LTV, the more attention your company should give to relationship actions instead of acquisition actions.

Thus, this metric is related to retention and consequently profitability of the current customer base.

How to increase the LTV

The calculation takes into account the value and the recurrence of purchase, including derivative products and services (ie, accessories and complementary services to a previously acquired). Thus, to increase the LTV is important to invest in retaining action to increase the recurrence and purchase frequency, as well as the average ticket.

The first question to be asked is: how can I retain a customer I don’t know?

Investing in data centered technology is paramount if you want to seriously know the customer, their preferences, their historical purchase and shipping, their online behavior. So, from there, you can develop a macro-strategy of marketing lifecycle with automated campaigns that accompany the client in his journey with the personalized communication one-to-one with automation campaigns.

There are relationship rulers that can be developed considering the customer life cycle and the appropriate communication channel to increase their LTV.

Welcome: in any situation, a warm welcome is essential for a relationship to start with the right foot;

Birthdays: congratulating the customer, offering a discount or suggesting a wishlist;

Interest by category: showing the items in the same category they visited on the site;

Cross sell: offering complementary products to what was purchased;

Review: inviting the user to evaluate the item they bought;

Content: tips on good use of the purchased product;

Refueling: Repurchase reminders based on lifetime average time of the product purchased, such as diapers, print cartridges and filter purifiers;

Cart abandonment: offering an advantage or just a reminder to the customer of the product they wanted increases the chances of sealing the deal;

Conversion Rate Optimization: optimizing the website through a CRO project that uses customer data, you can also turn it into a direct channel of communication. If each person is different, it doesn’t make sense presenting the same website to everyone.

Increasing the LTV depends on technology and a good strategy. Count on the Pmweb team  to help you on it.  🙂