February 3, 2017

5 Ways Brands Use Marketing Automation to Increase CLV

Marketers have grown fond of the customer lifetime value (CLV) metric, which provides a useful prediction of the total net profit a company makes from an individual customer. That’s not surprising, as it makes other analytical processes, like evaluating the cost of acquiring new leads, much easier.

But how do you increase CLV? We’ll show you how five well-known brands are doing it. First, a little education. 

What is CLV?

Customer lifetime value helps you assess the financial value of your customers so you can make better business decisions. It helps you figure out whether it’s worth spending additional resources on a given customer segment or whether you need to find other ways to increase profits.

There are several ways to calculate CLV. No need to go into detail and calculate it right now, but if you’re interested, here’s a good article and a calculator.

The formula looks like this:

customer lifetime value formula

Where:

  • CR = customer revenues
  • C = customer costs
  • R = retention rate
  • d = discount rate
  • AC = acquisition rate

Despite the formula’s limitations, it is useful, and you can quickly see which elements impact the profitability of your relationship with your customers:

  • How much your average customer spends per visit
  • How often they visit (per week, month, or year)
  • The average customer lifespan (weeks, months, or years)
  • Your profit margin per customer
  • How much it costs to acquire a customer

Given those five factors, you’ll realize that to increase the average CLV, you’ll want to 1) Retain your customers (especially the profitable ones) as long as possible, and 2) Get them to spend more in your business by purchasing more often, for higher value, and for a longer period. 

Easier said than done, but it’s not impossible. Take a look at the examples below and see how to increase CLV.

1. Cart, Browse, and Search Abandonment

One of the biggest challenges e-commerce businesses face is cart abandonment. Imagine how much it costs to attract new leads to your site, get them to browse products, and add items to their shopping cart. Now imagine how inefficient this process is if, on average, 68.81 percent of all online shopping carts are abandoned.

To tackle this problem, marketers usually choose between two tactics – retargeting and cart abandonment emails. Wine and liquor merchant Zachys used the latter and managed to grow their e-commerce by 53 percent, increase open rates and clickthrough rates by 10 percent, and earn $5 to $16 in revenue per email sent.

As you’ll learn from this case study, Zachys didn’t just send regular cart abandonment emails like most e-commerce businesses. They also sent browse and search-abandonment emails, so whenever someone searched a particular category or viewed a specific product page, they would receive a personalized email reminding them to purchase their favorite products.

This tactic helps cover the costs of acquiring new leads and persuading them to spend more. And if you get them through the check-out process once, the second time is even easier.

customer lifetime value

Product abandonment email example from Timberland

2. Onboarding and Early Activation

If you look closely at your list of users, chances are, even though they’ve shown interest in your brand, many never perform an action. Why not show them around your platform or store and point them to the action you want them to perform?

With this approach in mind, many software-as-a-service (SaaS) companies begin their new user relationships with onboarding email campaigns or interactive in-app walkthroughs. Through education in early stages of the relationship, they ensure that new leads interact with the product, get to know it, and stick to it long enough to get hooked.

ALSO READ: Why Drip Campaigns Work and How to Build a Good One

E-commerce businesses can follow the same path by explaining how easy it is to purchase the product, get it delivered, and return it if necessary. The check-out process should be intuitive and relatively short, so you don’t lose users (and their interest) along the way.

MeUndies, an online store that sells underwear and loungewear, uses one more tactic to make sure new users get hooked on their brand: they identify the customers who sign up but haven’t ordered anything after two weeks. Then they contact them with a humorous, automated email with a special discount code to keep them on the list.

customer lifetime value

3. Upselling and Cross-Selling

The best thing about upselling and cross-selling is that it doesn’t just work in brick-and-mortar shops; it also works online, and even for B2B companies. When you’re in the middle of the shopping process, you’re presented with other options you may like, be it an extra warranty for your laptop, different paint color for the car, or next-day delivery.

This tactic is used by the popular subscription shaving service, Dollar Shave Club. Although email newsletters aren’t ground-breaking, they are a clever way to convince users to place an additional order instead of waiting for their monthly order to arrive. Through this approach, they can increase the frequency of user “visits” to their store and consequently improve their CLV.

customer lifetime value

4. Segmentation and Drip Campaigns

Customer service and sales departments play an important role in most successful businesses. Their performance can make or break your marketing efforts, even if your product is first-rate. They have to be not only knowledgeable, polite, and friendly, but also timely.

But what if the number of customer tickets and inquiries is growing at a rate you can’t keep up with?

It’s not just the number of tickets that need to be answered. It’s also the right information that needs to be delivered to the right people. Some might not be ready to pick up the phone and chat with a sales rep. They might prefer to read the information on your site, check out case studies, and later decide it’s time to speak with a rep.

This was a challenge that TechnologyAdvice faced a couple of years back. As you can read in this case study, by using segmentation and automated drip campaigns, they improved their response time and catered to the needs of a larger customer base. Figuring out who their audience was (enterprise or retail customer) and what content might be relevant helped TechnologyAdvice achieve higher efficiency.

Before the campaign was launched, they saw average email open and click-through rates of 20 percent and 2 percent, respectively. Afterward, they consistently reached 40 percent and 6 percent.

customer lifetime value

5. Social Proof

Opinions matter. Internet users usually research products or services before they buy. They want to find out what others think and what advantages or disadvantages they can expect to encounter. According to Bright Local, 88 percent of consumers trust online reviews as much as personal recommendations.

Marketers that understand this concept know that acquiring reviews is important. Not only do reviews help persuade new prospects to make a purchase, but they also help you get to know your customers better — their language, features they find important, and how they use your product.

Not surprisingly, many e-commerce brands ask their customers to review the products they’ve purchased. Usually, an automated email asks them to share their thoughts with others, be it on their site or social media.

Some brands go beyond this approach. Not only do they ask customers to leave a review, but also to recommend products to other people they know. Since most people won’t do anything without incentive — even if they adore a brand —companies introduce referral programs to reward brand advocates.

This is exactly how Uber, Airbnb, and TransferWise acquire new customers. 

customer lifetime value

That’s Just the Beginning

Developments in marketing technology are equipping marketers with new ways to reach their audience more effectively and form stronger relationships. Thanks to tools like marketing automation software, they can answer customers’ needs faster and with more relevance. 

If you aren’t already using some of these processes to increase CLV, now may be a good time to evaluate your customer onboarding process. 


As content marketing manager, Michal Leszczynski is responsible for coordinating content marketing projects in GetResponse. Over the years, he’s planned, delivered, and optimized numerous email marketing campaigns for the brand’s enterprise clients. Currently, Michal’s main mission is to provide valuable and educational content for marketers — those just starting out as well as those already rocking in the online world. Connect with Michal on Twitter, @mrleszczynski.

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