Why Your Brand is Failing to Build Customer Lifetime Value

The world of e-commerce has grown exponentially in recent years. With the almost forced rise of online shopping (ahem ahem 2020), brands have been able to reach a wider audience than ever before. However, many e-commerce brands are failing to build customer lifetime value, which is crucial for long-term success. Let’s look at why e-commerce brands often struggle to build customer lifetime value and explore strategies that can be used to improve this metric.

The Struggle

One of the main reasons why e-commerce brands struggle to build customer lifetime value is the focus on short-term gains. Many brands prioritise acquiring new customers over retaining existing ones. While it's important to acquire new customers, it's equally, if not more important to retain existing ones. According to a study by Bain & Company, increasing customer retention rates by just 5% can lead to a 25-95% increase in profits. This highlights the importance of focusing on customer lifetime value rather than short-term gains.
Customers today expect personalised experiences, and brands that fail to deliver on this front are at a disadvantage. According to a study by Epsilon, 80% of consumers are more likely to do business with a brand if it offers personalised experiences. This means that e-commerce brands need to invest in technologies that enable them to provide personalised experiences to their customers. Brands can use customer data to tailor their marketing messages and create these experiences that resonate with their audience.
E-commerce brands also need to focus on creating a seamless shopping experience. This includes, as a minimum, optimising the website for mobile devices, providing fast and reliable shipping, and offering easy returns. A seamless shopping experience can help build trust with customers and increase the likelihood of repeat purchases.
Brands are also failing to differentiate themselves from their competitors. According to a study by Salesforce, 76% of consumers expect brands to provide a consistent experience across all channels, which means that e-commerce brands need to focus on creating a unique brand identity. Brands can create a unique brand identity by developing a strong brand message and using storytelling to connect with customers.

The Solution

To overcome these challenges, e-commerce brands need to adopt a long-term approach to marketing. This means focusing on building relationships with customers rather than simply acquiring new ones. Not too sure it works? Let’s take a look at Amazon.
Through customer retention methods, Amazon has had 91% of their first year Amazon Prime subscribers renewing for a second year! Increasing overall customer lifetime value and revenue!
Brands that prioritise customer experience and invest in technologies that enable personalisation are more likely to build customer lifetime value. AI can be used to analyse customer data and behaviour to gain insights into their preferences and needs. This information can then be used to create personalised experiences that resonate with customers. AI-powered chatbots can be used to provide personalised customer support, while recommendation engines can be used to suggest products based on customers' past purchases and browsing behaviour.
Want to gain a competitive advantage? Then look beyond the minimums (standard expectation of consumers these days) and more towards creating more unique offline and online experiences such as unboxing experiences (offline) and personalised post purchase messaging and product recommendations (online).
Customer lifetime value is built through owned media, namely, email marketing, SMS marketing or loyalty programmes.
Email Marketing that is personalised and relevant to the recipient can generate up to 138% more revenue. Previous customers are more likely to make repeat purchases through targeted and personalised emails.
Who’s doing it right?

Every Friday, Uber Eats sends a notification and an email containing a discount code to its users. By strategically timing their email sends and collaborating with local restaurants, Uber Eats ensures that it remains top-of-mind for consumers when they crave a convenient meal option.
SMS marketing reinforces brand loyalty, similar to loyalty programmes and push notifications. By strengthening the emotional connection between a business and its customers, their CLV can increase significantly. Additionally, SMS can help identify a business's most valuable customers. Those who actively engage with texts should be given special attention and recognition to further enhance their loyalty and CLV.
Who’s doing it right?

Starbucks has been at the forefront of SMS marketing, leading the way in customer loyalty programs through their mobile app. By enrolling in Starbucks Rewards, customers can benefit from the convenience of pre-ordering and making payments, receiving SMS notifications about exclusive promotions, earning points for complimentary food and drinks, and receiving birthday treats free of charge.
Customer loyalty programmes are highly effective due to their ability to combine gamification, which involves adding game-like features to a business to increase its appeal, with emotional connections to cultivate brand advocates. These loyal customers not only have a high CLV themselves, but also boost the CLV of other customers by providing recommendations and endorsements.
Who’s doing it right?

The XPLR Pass Program by The North Face provides customers with the freedom to select how they use their rewards points based on their individual lifestyles. Customers earn loyalty points by making purchases, attending events, checking in at specific locations, or downloading the North Face app. The program enables customers to redeem their points for distinctive travel experiences like mountain climbing in Nepal.
Building customer lifetime value is crucial for the long-term success of e-commerce brands. Brands that fail to focus on this metric are unlikely to achieve sustained growth. By adopting a long-term approach to marketing and prioritising customer experience and personalisation, e-commerce brands can improve their customer lifetime value and achieve long-term success. E-commerce brands that are able to build strong relationships with their customers and create a unique brand identity will be well-positioned for success in the years to come.

Many e-commerce brands struggle to build customer lifetime value due to a focus on short-term gains and failure to provide personalised experiences. To improve customer lifetime value, brands should prioritise customer experience, invest in personalization technologies like AI, create unique online and offline experiences, and utilise owned media channels such as email marketing, SMS marketing, and loyalty programs. Adopting a long-term marketing approach and building strong customer relationships are crucial for e-commerce brands' long-term success.