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Increasing customer lifetime value (CLV) as customer acquisition costs (CAC) rise is a must — here’s how to do it

Tracking your customer acquisition costs (CAC) and customer lifetime value (CLV) may not be the most glamorous part of your marketing efforts but they have a fundamental impact on your bottom line.

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Two of the most important metrics in your marketing budget are also two metrics that often fall off the radar.

After all, they’re both components of a simple equation that can spell success or failure not just for a single marketing campaign but for your entire business. The difference between the cost of attracting a new customer and the sales you can expect to gain from that customer is what pays for everything else. The bigger that difference is, the greater your profits will be.

This means that as CACs rise in a more competitive marketplace, CLVs have to rise proportionately in order to keep everything in balance. And while CACs may be mostly beyond your control, there are plenty of things you can do to boost CLVs and get more value out of each customer you gain.

Plus, everyone knows that getting more out of the customers you have is always more cost-effective than attracting a first-time customer, so you have every incentive to focus on this side of the equation.

Let’s look at what you can do to increase the customer lifetime value (CLV) to help it keep pace with rising customer acquisition costs (CAC).

An effective onboarding program

There is probably no better way to decrease churn (which is essentially the same as keeping your customers around for longer, which means greater CLV), than a good onboarding experience.

Deepening the customer experience through onboarding has a lasting positive impact. And while the process will look different from product to product and industry to industry, it’s all about making the customer comfortable with their choice and ready to return for more.

Guides, tutorials, video resources, other content and more—they can all help new customers to settle in faster and get more out of their purchase, thus increasing satisfaction and clearing the way to a deeper relationship.

A good onboarding program answers questions before they are asked and helps customers feel welcome in a community built around your brand. Don’t make the mistake of thinking that you’ll slowly build a good relationship over time—time is one luxury you don’t have in a hyper-competitive online market that constantly bombards customers with new offers.

Focus on using your onboarding to accelerate the process of creating a bond between your brand and new customers.

An easily accessible knowledge base

Here’s where a lot of the material you use for onboarding gets a second life—an archive of materials customers can reference to learn more, solve problems and get more out of their experience with your brand.

This is an easy and obvious way to support your customers and keep them coming back to you and your site. The details will depend on the product, of course, but a knowledge base will make you the go-to source for help, advice and instructions (and will help with your SEO, too).

Offering an extensive, detailed and updated knowledge base communicates the idea that you’re ready to help when needed and are dedicated to providing the answers and support that customers need.

As with most things related to CLV, it’s about creating a level of comfort and staying top of mind. If you can focus on just these two things, you’re already halfway to more sales over a longer customer relationship.

Customer support, everywhere all the time

In an online world with time zones and insta-everything, customers expect insta-answers to their questions. This has two consequences for online retailers.

First, it means an omnichannel presence is a must. Your customers are on every channel imaginable and you need to be too. Your website, social media, dedicated apps, old school email and more—you need to be ready to interact wherever they choose to reach out to you. Automation can help here, especially with the advent of chatbots, automated replies, etc. but the days of “Please send an email to...and we’ll get back to you” are over.

Secondly, your customer support has to be available 24/7. There simply is no other way in modern ecommerce. Again, automations are essential here and, yes, some more complex issues may have to wait until business hours for personal support but there is no such thing as “We’re closed right now, please try again…”

Keep the conversation going and keep it focused on them

What we mean here is using your regular contact to communicate the value that customers receive.

Let’s illustrate this with a common sales and marketing strategy—the use of email for promotions and newsletters.

Too many brands bombard customers with promotional messages that simply tell customers to buy now!!! or focus on the latest sale on this or that. Newsletters are often packed with much of the same, short on “news” but plenty of reminders about sales, savings and spending.

This is a huge mistake for two reasons. First of all, no one signed up for your emails or newsletter to get non-stop announcements about sales. Where is the value in that? Where is the takeaway that they can use to make their experience with your product even better? How are they really benefiting from being on your subscriber list?

On top of that, it’s a huge wasted opportunity. Every piece of communication you send should be framed in terms of how the customer is benefiting from their relationship with you, a reminder of why they bought from you in the first place.

When they decide they’re interested in buying more, they will—unless you alienate them with too many useless messages first.

Ask for feedback, reward it when you get it

There are lots of metrics for measuring customer satisfaction but be sure to include some that involve reaching out and asking for feedback. Customer satisfaction surveys asking about multiple aspects of the buying experience can be useful in identifying areas for improvement and getting an early warning on potential problems.

On top of that, these surveys signal that you’re interested in fixing problems when you can and you make every effort to improve based on customer opinions. Even when customers don’t respond to the survey, they still see that you’re making the effort to reach out to ask them what they think.

But don’t expect too much for free. For better response rates, include a little incentive to sweeten the deal. Discounts, loyalty points, special offers—whatever works. In addition to generating more feedback, you’ll add a few conversions as well!

Watch your pricing

And we don’t mean making sure it’s too high, we mean making sure that it’s high enough.

All the previous points on our list were about keeping customers happy, loyal and coming back—the “lifetime” part of CLV. But the “value” part often gets overlooked. Obviously, we’re not talking about overcharging anyone or having the highest prices on the market but making sure that your pricing is consistent with current market conditions and costs.  

Your margins need to be whatever they need to be and there’s nothing wrong with optimizing them to fit your needs. Nothing else matters if you don’t have a profitable operation and you can’t provide the customer care measures we’ve listed if you can’t pay for them.

A periodic review of your pricing structure is a must. Even small adjustments can have a big impact on your bottom line as a company and your average CLVs. Every industry will have its own unique circumstances when it comes to pricing and certain brands will add their own strategy to that, but it’s important to remember that pricing can impact your CLV just as much as measures designed to extend the time a customer spends with you.

With edrone, it’s easy to keep an eye on CLVs. Just go to your Dashboard and get instant, up-to-date information based on order values, the amount of orders per customer and purchase frequency. Our system is able to calculate your CLV and other customer-related metrics to ensure that your sales and marketing efforts are on track and achieving the results you need.

Do you have your own secrets for boosting CLV? Want to learn more about how edrone can turbocharge your ecommerce? We’re always happy to hear from you, just drop us a line at hello@edrone.me!


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