Example of user-generated content on Instagram

7 Proven Ways to Increase Retail Customer Lifetime Value (2023)

A common misconception for consumer brands is that the marketing process ends at the point of purchase.

Instead, smart brands recognize that a customer’s lifetime value—or the net profit that you’ll take in over the course of your entire relationship with a customer—is far more important than any singular purchase in terms of revenue and influence over others.

But that customer lifetime value will continue to stay low if they only shop in your store once and never return. The subject of luring customers into your storefront over and over again has become a hot topic in recent years for several reasons.

What is retail customer lifetime value?

Customer lifetime value (CLV) is the total amount of money a customer is expected to spend in your business over the course of their relationship with you. The formula to calculate customer lifetime value is: CLV = (Average Value of a Sale) x (Number of Repeat Transactions) x (Average Retention Time in Months or Years for a Typical Customer).

On average, a good CLV is around three to five times your customer acquisition costs. So, if it costs you $100 to acquire a customer, aim for a CLV of at least $300.

Why retail customer lifetime value is so important

Intense competition for consumers’ disposable income

With direct-to-consumer brands popping up daily, and the side hustle economy enabled on platforms like Shopify, brands may only have one chance to capture the loyalty of customers before they move on to the next retailer.

Capturing a sizable portion of market share is more difficult these days, regardless of your product or service. With so many options available for consumers, stores and brands have to work hard to rise above the noise. 

Proliferation of social networks

Historically, a customer that had an issue with a brand’s product or service had very little external recourse. They could tell their families, friends, and colleagues, but their reach was limited. 

Today, they can share their frustration with millions of other potential customers, and negatively rate brands on third-party sites such as Amazon or Yelp, which can have an exceedingly detrimental impact on sales.

In fact, a 2022 eye-tracking study found that when consumers pay more attention to negative comments, they tend to give up on buying a product. When they pay more attention to positive comments, they choose to buy.

As such, brands have a powerful opportunity to engage consumers post purchase, improving not only the likelihood of return business, but the chance that they will share their positive experience with other potential customers.

Shifting consumer behaviors

Today’s consumers expect more from brands. It’s no longer enough to convey the function of a product or service in marketing efforts; instead, consumers want to feel as if they are part of something bigger.

Brands like Toms Shoes and Warby Parker have gained massive, loyal followings, at least in part because their products are closely aligned with philanthropic causes. Certainly, customers will still make impulse purchases, and will still consider price and convenience for specific buying decisions.

How to increase retail customer lifetime value

  1. Create a community around your brand
  2. Provide utility for customers beyond the purchase
  3. Involve shoppers in your marketing efforts
  4. Provide great customer service
  5. Offer loyalty programs
  6. Make it easy for customers to buy again
  7. Follow up with email marketing campaigns or retargeting ads

1. Create a community around your brand

Modern consumers want to shop with brands that align with their values and lifestyle choices. They believe there is power in the insights of their peers, and are more comfortable gaining product inspiration from one another than from brand messaging. 

With the advent of ad-blocking, especially, there is a need for better marketing and ecommerce experiences. Instead of resisting this trend, brands can lean into it by helping enable these experiences through curated consumer communities.

Such communities can help forge an ongoing emotional connection with your customers. This is crucial, because feelings drive buying decisions. Research shows that emotions fuel customer choices before, during, and after purchases. Retail expert Georganne Bender of Kizer & Bender says, “People’s buying decisions are influenced daily, and emotions play a huge impact on these decisions.”

Your customers are included in that group that makes spending decisions based on their emotions, and they’d likely spend more with your brand if they felt emotionally charged to do so.

2. Provide utility to customers beyond the purchase

As we’ve established, the belief that the pursuit of a customer ends after the point of sale is largely outmoded. Brands that are only focused on a singular selling opportunity are missing the bigger picture and leaving a ton of revenue potential on the table. 

By engaging customers post-purchase with education, value-add services, and complementary product offerings, brands can re-engage customers and drive additional purchasing behavior.

Keep the conversation going with customers after they leave your store. Post-purchase communication is a vital step that keeps merchants and consumers connected.

Much of this effort is enabled through intelligent data collection and segmenting. If you can create personas and audiences based on demographic data and prior purchasing behavior, you can serve up relevant messaging to entice repeat business.

3. Involve shoppers in your marketing efforts

In the retail sector, specifically, many brands are turning to consumers’ own content as a way to better understand their target markets and provide them with incentives to repeat purchase behavior. 

With consumers sharing over 95 million photos per day on Instagram alone, many of which feature brands and products, there is an enormous amount of insight that can be gained by viewing how consumers are considering brands and utilizing products in their day-to-day lives.

Example of user-generated content on Instagram
Fashion Nova shares user-generated content to support its Instagram marketing campaigns.

Brands that re-share this content and encourage users to create using hashtags, through contests, or via other messaging, are seeing a wealth of high-quality visual content that helps to enhance the communal feel. 

Additionally, this content can be used to connect otherwise disparate marketing channels, such as display advertising, social media, and ecommerce, and even offline in print, direct mail, and outdoor activations.

4. Provide great customer service

An important part of customer service is helping customers get the value they paid for, and quickly. In a recent HubSpot report, 60% of respondents said they will be more loyal to a brand with a fast customer service response time.

Great customer service means exceeding expectations and making sure every interaction is positive. Retailers can mitigate negative experiences and build long-term relationships through trust.

If you’re a retailer selling online, you can have a live chat option on your website like Uoma Beauty. This provides immediate assistance and personalizes the shopping experience for browsers. Tools like Shopify Inbox and Gorgias are perfect for website live chat. 

Image of Ioma Beauty homepage using live chat to answer customer questions.
Uoma Beauty uses live chat to answer customer questions quickly.

In-store, you can provide great customer service by:

  • Ensuring staff members are well-trained about products, store policies, and procedures
  • Conducting regular training sessions on soft skills like communication, empathy, and active listening
  • Making sure staff can make recommendations based on customer needs
  • Offering an easy return and exchange policy
  • Addressing issues right away 

At the core, great customer service is having empathy and genuine concern for customers’ needs. When your team cares and goes the extra mile to make customers feel valued, you’re on your way to providing exceptional support. 

5. Offer loyalty programs

Loyalty programs are a win-win. Customers get free stuff and fun rewards, and you get to sell more and understand what their customers like. The average American consumer belongs to 16.7 customer loyalty programs, according to a report by Bond Brand Loyalty.

With its loyalty program, Blumetopia, bodycare retailer Blume offers a points system called Blume Bucks. To earn Blume Bucks, customers follow Blume on Instagram, place orders, or refer friends. Customers can redeem their Blume Bucks for merch, free products, and other cool gifts from Blume. 

Image of reward points breakdown for Blumetopia loyalty program.
Customers can earn Blume Bucks easily with Blume’s loyalty program.

When a store knows what you love, it can offer you better deals and products, making you want to shop there even more. It’s like a circle of trust and rewards between the store and the customer.

There are plenty of apps available to run your loyalty program in-store and online. A few top options for Shopify merchants are Smile and Joy

6. Make it easy for customers to buy again

Retailers that prioritize customer experience stand out, whether online or in-store. Customers that have an easy time shopping with your brand over and over are more likely to return. 

One way to make it easy for customers to buy again is through simple returns. This makes customers feel secure in their purchase, and if the product doesn’t fit or work, it’ll be easy to swap or buy something else. 

Apps like AfterShip make it easy for customers to exchange items or get a refund. You can build branded returns pages that recapture revenue and provide a seamless experience online.

Image of customer exchanging items through AfterShip
A customer exchanges items easily through AfterShip’s returns page.

Another tactic is using Shop Pay. Once a customer makes a purchase, Shop Pay remembers their details. So the next time, instead of tediously typing out a shipping address and payment details, Shop Pay has it ready to go. It’s convenience at its best, guaranteeing faster and hassle-free checkouts. 

Example of Shop Pay checkout screen
Using Shop Pay while checking out at S’wheat’s online store.

7. Follow up with email marketing campaigns or retargeting ads

Reach out to customers after they’ve visited or shopped from your store. Using email or retargeting ads, you can remind them about the brand or show them things they liked. 

Say someone was viewing a popular moisturizer but didn’t buy it. You can use Facebook retargeting to send them a little reminder, like BOOM! By Cindy Joseph does below.

Example of retargeting ad on Facebook
A good retargeting ad includes social proof, compelling text, and a good CTA.

If you’re keen on email, there are plenty of campaigns you can send. For example, if you know a customer likes a particular product line, you can send them a reminder when a new product is about to drop. Melt Cosmetics does this with its Slick Waterline Pencil line announcement email.

Reminder email campaign by Melt Cosmetics
Melt Cosmetics informs customers about new products through email.

Brands like BOOM! By Cindy Joseph and Melt Cosmetics use these tactics to keep their products front of mind. By reminding customers of the items they are interested in, they are more likely to follow through and make a purchase. 

Create more loyal customers for your business

Improving average customer lifespan is critical for retailers. It can lead to higher average order value, more profitability, and more loyal customers. Getting there involves more than just plugging numbers into the customer lifetime value formula. 

If a modern brand wants to engage and convert a potential customer, it needs to look at the relationship beyond the point of purchase and consider the deeper desires of the consumer. Doing so will help convert one-time shoppers into repeat customers.

Fuel your retention marketing with Shopify

Only Shopify lets you create customer profiles that unify online and in-store order history, preferences, and contact information. Use tags to build segmented mailing lists and increase customer lifetime value, make more relevant product recommendations, and more.

Retail CLV FAQ

What is the lifetime value of a customer for retail?

Retailers talk about a customer’s lifetime value when they think about how much profit they’re going to make over the long run. It takes into account both the revenue and costs of acquiring and serving the customer.

What is LTV in retail business?

LTV in a retail business is a metric that quantifies the projected revenue an existing customer will generate for the business during their entire duration as a customer, minus the costs of acquiring and maintaining that relationship.

What is an example of a customer lifetime value?

An example of a customer lifetime value might be: If a customer shops at a clothing store and spends an average of $100 annually for 10 years, with the company’s net profit margin being 20% and a $50 acquisition cost, the LTV would be (10 years x $100 x 20% – $50) = $150.

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