A mark of a successful e-commerce business is the ability to bring customers back repeatedly. That means extracting as much value as you can from your customer base is a critical component to building a strong base for performance. One way to measure how well you’re doing this is Customer Lifetime Value, or LTV. LTV calculates how much profit a customer will generate with you over the duration of their relationship with your business—and can help you identify where to focus your opportunities to drive more lasting customers.

LTV is made up of four key components:

Once you have established your brand’s LTV, you can pull various levers to maximize each component and improve your LTV overall.

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1. Build customer loyalty to drive repeat purchases

From the moment a customer makes their first purchase, you have established a relationship. To keep this relationship going, you need to work hard to ensure your customers stay engaged, ultimately encouraging them to come back for more purchases. To enhance customer engagement and keep them excited about your brand:

  • Create and maintain an email marketing list to share pertinent news, the latest product releases, and brand updates.
  • Personalize your brand’s user experience with curated recommendations, offers, and rewards. You already have information on what your customer likes—use it to enhance your results and improve their experience.
  • Optimize outreach frequency to make sure customers get the right level of communication. To refine this, analyze click-through rates on re-engagement ads.

2. Show up more often in their purchase journeys to incentivize more orders

Most ecommerce businesses should be aiming to be in a customer’s “normal purchase rotation.”  Try to surprise and delight your customers to make ordering from your brand a part of their routine. Through habit or intrigue, keep them coming back and wanting more:

  • Offer a subscription model where customers can regularly receive items they use frequently, locking in a consistent source of revenue.
  • Regularly launch new and limited-edition products, keeping the brand fresh and adding an element of exclusivity and urgency that will drive your customer to action.
  • Create an ongoing dialogue though SMS or email programs. Outreach should be about maintaining engagement, rather than re-engagement, so content strategy may vary from your standard campaigns here.

Note that this one may not apply for your business. If you sell high-consideration, low purchase frequency products such as mattresses or high-end appliances, then you should aim to focus more on obtaining referrals and positive customer reviews, as individual customers are unlikely to regularly re-order.

3. Boost the average spend per order

The best time to cross-sell to your customer is when they’ve already decided to purchase something. They are already in the right mindset to buy from your brand, so what can you offer to add more value?

  • Utilize product bundling and real-time cross-selling of complimentary products to offer a value-add recommendation at check-out.
  • Offer discounts for large purchases (i.e., 10% off with a $100 spend) to encourage customers to add items they may want but otherwise forego.
  • Offer free or discounted shipping for orders above a minimum value. This has proven to be one of the most effective tactics in increasing basket size.

4. Push higher margin products

When it comes to gross profit margin, not all products in your store are created equally. The cost of goods, scale, and shipping costs can all affect your bottom line. By shifting demand toward higher-margin items, you can increase the value a customer brings without them having to buy more. To do this effectively:

  • Build campaigns around the products which are making you the most money. Clever web design can also nudge customers towards these products.
  • Optimize promotional calendars to control which items are being purchased and manage demand, avoiding situations where discounts are required to clear inventory (i.e., seasonal items).

Avoid pitfalls along the purchase journey

While there are plenty of ways to optimize your LTV, there are also some traps to be aware of to ensure the equation doesn’t swing in the other direction:

  • Make sure you’re targeting the right customers. It is hard to maintain a satisfied customer base over the long term if you are acquiring customers who won’t continue spending on your business. Find customers who are passionate about your brand and invest in keeping them.
  • Be realistic about what your LTV number should be. As you embark on a consistent path to improvement, the reality is that any business is going to have churn. Set reasonable targets and don’t over-invest in customers who are going to leave regardless.
  • Keep a healthy balance across each of your goals. Marketing is complicated. You need to balance LTV with optimizing CAC, ROAS, CPA and the other metrics essential to analyzing the success of your business. Keep an eye on your overall company vision and maintain an integrated approach to healthy growth.