When it comes to subscription businesses, customer lifetime value (LTV, CLTV, or CLV) is one of the most important metrics to both monitor and try to increase. That’s because maximizing LTV ultimately means stronger subscriptions, better relationships with existing customers, increased customer loyalty, and higher revenue.
And with customer acquisition costs (CAC) at an all-time high, it’s more important than ever for eCommerce brands to shift their strategy to retention by weaving in more LTV touchpoints across the customer journey in order to create a superior, seamless subscription experience.
To help drive your recurring revenue and customer engagement, we’re diving into the top 7 ways Shopify merchants can increase customer lifetime value to boost their bottom line and create a stronger subscription offering overall.
If you’re wondering how to improve your customer lifetime value, you probably already know what it is. But to ensure we’re all operating with the same definition, here’s a quick review:
LTV measures the total profit that your brand can expect to generate from a given customer over the entire course of their relationship with your brand. The metric takes into account the average customer lifespan as well as customers’ average order value (AOV).
In other words, the better your customer relationships and customer retention, the more you can expect your subscribers to spend and the higher your LTV should be. It’s less about the number of customers that you have and more about the quality of the relationship that you have with each customer.
Since eCommerce subscription brands are so reliant on recurring revenue, increasing LTV is directly correlated with a healthier subscription brand. And as we mentioned, customer acquisition costs (CAC) are higher than ever — so choosing to invest in the loyal customers that you already have is a lucrative strategy.
Speaking of CAC — merchants also regularly compare their lifetime value to their CAC as a way to track that they’re keeping their spending in check. A great LTV:CAC ratio means you’re generating more revenue than you’re spending to acquire new customers.
Now that we’ve covered our bases, let’s dive into strategies to increase customer lifetime value.
The first step to take in order to boost your LTV is to go beyond the standard ‘set it & forget it’ subscription models and tailor your subscription program to provide an elevated customer experience.
So what does this mean exactly? Tailored subscription offerings precisely meet the needs of your unique audience. From customizable bundles to anchor dates, sequential subscriptions, and more, there are numerous ways to align your subscription program to your target customers’ needs.
Let’s start with bundles. Product bundling offers a range of advantages on its own — and with 71% of consumers expecting brands to deliver more personalized interactions, there is truly no better way to deliver these experiences than through an interactive, customizable bundle experience.
Offering bundled products or build-a-box style subscriptions is a great way to gain exposure across your product line while also creating a memorable experience for customers.
Another great way to tailor your subscription program is to offer a seasonal subscription model using anchor dates. Shopify merchants can easily offer seasonal subscription drops by using anchor dates to set a day where billing interval calculations should be made and product ship dates are scheduled.
Merchants can also implement a sequential subscription model should your product demand a first-order one-time purchase. One of our favorite brands, Jolie, does this beautifully. The purchase of the Jolie showerhead triggers a subscription to receive a filter replacement every three months, ensuring that customers never forget to change their filter.
So whether you’re interested in implementing a prepaid giftable subscription offering like Horsham coffee or a bundled tasting experience like Sip Tequila, aligning your subscription offering with your product and subscribers’ needs is the best way to maximize customer satisfaction and start increasing your LTV.
When it comes to deepening subscriber relationships and boosting customer engagement, it’s more crucial than ever to create a cohesive brand experience at every touchpoint. In fact, creating a consistent brand presentation has been found to boost revenue by as much as 23%. This refers to brand colors, fonts, overall style, and your brand voice.
When we talk about your brand’s experience, it doesn’t just stop at your DTC site and your social media; rather, it’s a best practice to have your brand aesthetic extend to your customer account portal. Your consumers should know it’s your portal from the instant they log in, seamlessly matching your product detail page (PDP). That way, they always feel in touch with and connected to your brand.
A great method of leaning further into your brand’s aesthetic while simultaneously showing off your subscription is to overcommunicate the details and value of subscribing — all in your brand’s voice and style.
You can align your brand’s voice with marketing banners directly in the customer account portal to double down on key messaging and communicate all the benefits of your subscription program once more. That way, subscribers are always made to feel special and are subliminally encouraged to remain subscribed.
This brand experience should also extend to your external messaging. Recurring upcoming subscription orders are a prime opportunity to strategically engage your customers via email and SMS.
Using a subscription-led email and SMS strategy gives brands more reasons to check in with customers, ultimately increasing their lifetime value. Further, you can build trust by communicating with subscribers about their upcoming subscription orders, new product launches, subscriber-exclusive promotions, and even if their credit card on file is about to expire (which is crucial for preventing involuntary churn).
Encouraging subscribers to remain loyal to your brand starts with making them feel special and in control after they’ve gone past checkout.
Think of your subscribers as VIP members (after all, they’re your most valuable customers) and create an elevated subscription experience that gives them full control over their digital customer journey. Giving subscribers flexible subscription management ensures that your subscription can meet your audience’s ever-changing needs.
Allow subscribers to adjust the frequency of their subscription orders and equip them with the ability to expedite, delay, and swap their next order however they see fit. This level of flexibility builds trust between merchants and their loyal customers while also delivering a membership-like experience — all in the name of boosting LTV.
To continue crafting a true VIP experience, roll out the red carpet for your subscribers with exclusive member-only benefits. For example, offer subscribers special discounts, exclusive gifts, and early access to new products to reward them for their loyalty. In addition to delighting your most loyal customers, member-only benefits also aim to increase AOV and overall LTV.
And remember: one of the pillars of a strong and flexible subscription experience is stellar customer support should subscribers ever need it. Almost nothing causes subscribers to churn faster than bad customer service (seriously — 80% of consumers will switch to a competitor after more than one bad experience and half will switch after only one).
Just as flexibility and control matter to subscribers, so does an engaging and compelling digital experience full of fun perks. Going beyond the status quo account preferences by offering the most engaging customer account portal experience to give subscribers a reason to stay and engage with your brand.
Equipping your subscription program with features like in-portal Instagram feeds, loyalty programs, and more is the best way to increase customer loyalty, brand engagement, and lifetime value.
Plus, a great tactic to introduce a wider audience to your products and subscription program is adding an option for customers to gift their next subscription order to a friend or even offering a 3-month giftable subscription.
Studies show that 65.5% of consumers are likely to gift a subscription this year, and 82% of people who were gifted a subscription box ended up also subscribing themselves. Not only does gifting an order or a subscription help subscribers feel even closer to your business, thereby increasing their engagement and LTV, but it also helps draw in new customers. It’s a true win-win.
Further, you can incentivize word-of-mouth marketing and turn your subscribers into micro-influencers with a seamless referral option in the customer account portal — a great way to build from your most loyal customer base and introduce more consumers to your brand. Of all your marketing efforts, this will be one of the most valuable forms of acquisition; after all, customers acquired via referrals have a 37% higher retention rate and a 16% higher customer lifetime value. Not only that, but customers who were referred are actually also 4x more likely to refer their friends.
In other words, many LTV-boosting tactics actually come with a variety of other benefits — like acquiring more high-value customers.
Offering a loyalty program with rewards that customers truly value helps further cultivate mutually beneficial relationships between brands and their customers.
Coupling your subscription program with loyalty rewards built directly into the customer account portal is an excellent way to reward customers for their loyalty and simultaneously encourage them to spend more.
We’ve talked about the power of gifting subscriptions — and the best part is you can leverage your loyalty program to further encourage referrals. Offer up loyalty credits for subscribers who gift their next subscription order to a friend or make a successful referral.
It’s also a great idea to give subscribers control over how they use their loyalty credits, with options such as a percent off their next order, discounts on a new product, complimentary add-on products, and more.
A stellar rewards program can also be leveraged to increase customer retention rates. For example, if you are seeing a spike in your churn rate after a certain amount of time, offer subscribers proactive loyalty credits before the month when engagement drops to ensure that they do not cancel their subscription order completely.
Your current subscribers are your best customers. In fact, you’re roughly 50% more likely to successfully sell to your current customers than you are to new customers. The secret is to find compelling ways to get subscribers to spend more without making them feel like you’re selling them something extra.
We think it helps to think about it less like trying to increase however much each customer spends and more about increasing the true value and incentives that you can provide to them.
One of our favorite strategies for increasing AOV and simultaneously creating a better customer experience is to lean into personalized recommendations. Creating tailored email marketing to specific customer segments in order to highlight products that your customers would like is an incredibly effective way to delight subscribers and encourage them to buy something they weren’t planning to buy.
As we mentioned, your customer account portal is full of opportunities to increase customer LTV — and this also goes for upselling and cross-selling. Brand your trending upsells under seasonal products, creator picks, or even featured monthly flavors or styles as a way to draw engagement, build community, and create buzz around whatever products you’re trying to push.
Further, feature your most popular products as one-time add-ons that subscribers can seamlessly add to their next order. We’ve also seen brands successfully market merch as a one-time add-on, which serves as another creative marketing strategy to gain your brand more exposure while also increasing LTV.
It’s crucial for merchants to analyze their subscription and overall customer data in order to make optimizations to their subscription program and promote customer retention.
As a best practice, keep an eye on how often people are skipping their next order to adjust the frequency you are offering. If you’re noticing a decent number of subscribers skip their order a few times, you may need to offer a lower cadence to better cater to your subscribers.
Further, if the majority of subscribers are choosing the 60-day delivery frequency instead of the 30-day option, make that the default option instead. Collecting this subscriber data is an invaluable form of customer feedback that you can gather passively to strengthen your subscription.
Your subscription data can also be leveraged to identify which products are frequently bought together for bundle opportunities. If you see two or three products consistently purchased together, make it easy on customers by bundling them together and offering a meaningful discount to encourage customers to buy the bundle.
As we mentioned, subscription analytics are great for diving into a cohort retention analysis to mitigate any areas where there may be a drop in subscribers. If you are noticing a trend that customers are unsubscribing after a certain number of months, that’s when you can reduce customer churn with a special offer (like loyalty points, as we discussed) or a discount prior to that month to incentivize retention.
And in general, listen to your customer feedback! Implementing cancellation surveys to understand why subscribers are churning can help you make key optimizations to address their pain points and improve your offering overall. Anything you can do to tighten retention will have an impact on your customer lifetime value.
With as many as 75% of DTC brands offering a subscription-based offering by the end of this year, focusing on creating a superior subscription experience to differentiate yourself from competitors will be key for maximizing LTV and boosting your brand’s total revenue.
To explore how Smartrr has helped a range of Shopify brands maximize LTV, check out our case studies.
And if you’re ready to commit to the smartest suite of tools specifically designed to increase lifetime value, send us a note.