Imagine you are at a store looking for something to buy. You've been there before, so the staff knows your name. As soon as you walk in they greet you with a smile and ask how they can help you find what you need. And if it's not in stock, then they order it for you without any hassle or extra charge.
It's this kind of customer service that makes repeat customers out of people who might have just walked by otherwise. But small business owners often focus solely on lead conversion numbers rather than keeping their eye on the prize: Lifetime Value (LTV).
This article will provide an overview of the advantages of focusing on LTV over lead conversion, provide information on how to achieve this goal within Shopify, and discuss ways you can work customer retention into your marketing plan.
Lifetime Value (LTV) is defined as "the net profit generated by a custom during his or her relationship with a company."
The first step to achieving success by focusing on LTV is to calculate your LTV:CAC (Lifetime Value: Customer Acquisition Cost) ratio. This can be done by dividing the average revenue from a customer over their lifetime, or the number of years they will remain as a customer, by the amount you paid to acquire them.
Is it worth it to spend more on acquiring a customer in order to make more money over the duration of their relationship with your business?
Here are some examples:
So what do these numbers mean? Well, if the ice cream shop focused purely on acquiring new customers instead of keeping their eye on the profits they made from each customer, then they would have ended up losing money after 3 years. And if the B2B software provider focused purely on acquiring new customers instead of keeping their eye on the profits they made from each customer, then they would have ended up losing money after 8 years.
Your LTV:CAC ratio may vary, but in general the higher it is, the better.
So why does focusing on LTV instead of lead conversion matter?
Well, to begin with, acquiring new customers can be expensive.
Acquiring a customer through traditional marketing methods, such as paying for online ads or cold-calling potential leads, can cost anywhere from $20-$100 depending on your company size and the type of traffic you drive. Plus there's opportunity cost: if you spend $100 on a potential lead, then you're not able to spend it elsewhere.
This is why focusing solely on lead conversion can be a dangerous game plan for small business owners because the more money they sink into acquiring new customers, the less profit they make. However, there are a number of ways to lower the cost of acquiring new customers and still afford to focus on LTV.
Glow can help you increase your LTV by automating different customer service tasks, improving e-mail campaigns, and increasing social media reach.
One of the best ways to increase your LTV is by implementing a rewards program in Shopify. Glow's loyalty and referral programs help you do just that.
For one, every purchase counts as a point toward receiving bonus items or discounts on future purchases, which means returning customers will have more of an incentive to continue buying from you.
Plus, there is a referral program that allows consumers who love your brand or products to send their friends and family members your way by offering a discount on their first order. The end result? You get a new customer and the referrer gets rewards for sharing your business.
Another way to increase LTV is through automated customer service and e-mail marketing. Glow provides a fully-integrated solution that automates the collection of data from your customers via email signups or signups on any website that uses Shopify, allowing you to use this customer data as a way to stay in touch with them and offer personalized e-mails.
In addition, you can improve your bottom line by minimizing the time spent on repetitive customer service tasks such as: helping customers create their accounts and checking out of the store; answering questions about shipping and return policies, and providing product recommendations.
Automating these tasks will free up your time to focus on strategies that increase revenue and LTV instead of answering the same customer questions over and over again.
Another feature from Glow worth looking into is its social media integration, which means you can easily integrate Facebook, Twitter, Instagram, Pinterest, and email sharing onto your existing Shopify store. This will help you increase social engagement with your customers in a number of different ways, including:
While lead conversion is important for short-term business growth, it should only be one strategy in a long-term marketing plan that aims to increase LTV and establish a strong, loyal customer base. It's important to remember that even if it takes a little more time and effort upfront, these long-term strategies will save you money in the end because you won't have to keep spending money attracting new customers. By focusing on LTV over leads, your business should see an increase in profits and a long list of loyal customers to work with.
For more information about how Glow can help you increase Shopify customer retention, contact us today!
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