Boosting Customer Lifetime Value: Turn One-Time Shoppers into Repeat Customers

Shoppers engaging in storefront | Shopify Retail blog

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, including:

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 sizeable 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, according to a study conducted by Harvard Business School for restaurants, a one-star difference on Yelp can lead to a 5-9% difference in annual revenue. Of course, the reverse is also true. Consumers that have positive experiences with brands are empowered to share their satisfaction with a far bigger network.

The increasing popularity of social networks has amplified the effects of word-of-mouth marketing. While this method of marketing is one of the most old fashioned, it’s also one of the most powerful. It impacts 20% to 50% of all purchasing decisions, according to the research firm McKinsey. And 92% of consumers will act upon recommendations from friends and family over any other form of advertising, based on research from Nielsen.

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.

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.

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.

However, 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.

Here are three strategies to get you started:

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 recently said: “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.

Many brands in the financial services sector have done a good job with this strategy by creating the perception of exclusivity for their customers through loyalty programs, partnerships, and other benefits given only to their audiences.

Content portals designed to help customers share these experiences with one another and rate potential benefits of various credit cards and other financial services offerings help relieve the complexity of the industry and replace it with a sense of community and shared experience.

One such example is BB&T, which allows banking customers customize their portal dashboard with “tiles” that include information that’s most relevant to them (think breakdowns of spending by category, sales receipts, etc.). This customizable experience gives customers control over how they view their finances at a glance, and spurs them to check their online banking more regularly.

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; especially when you consider that attracting a new customer costs five times as much as keeping an existing one.

READ OUR GUIDE: Want to keep the conversation going with customers? Check out our guide on post-purchase communication strategies.

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. Not sure how to go about building buyer personas? Read our guide: How to Build Buyer Personas For Better Marketing.

The good news is that most customers, particularly millennials, are willing to give retailers their personal data in exchange for utility. In fact, according to Aimia’s Global Loyalty Lens report, 80% of consumers in 11 markets studied are willing to share personal information, with the idea that it will improve their experience with brands. However, just 23% are seeing that value through messaging highly relevant to their interests.

What does this mean, exactly? There is a disconnect between customers and brands, leaving plenty of opportunity for those able to adjust and create more personalized shopping experiences. Brands that can provide more utility to customers beyond the purchase will increase engagement, conversion, and long-term loyalty.

To cultivate a more customized experience for your shoppers, simply follow the steps we’ve outlined in “4 Ways to Personalize Your Customer’s Shopping Experience.”

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 featuring 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.

Brands that re-share this content and encourage users to create using hashtags, through contests or other messaging, are seeing a wealth of high-quality visual content which helps to enhance the communal feel. Additionally, this content can be used to connect otherwise disparate marketing channels, in display advertising, social media, ecommerce, and even offline in print, direct mail, and outdoor activations.

According to a study conducted by Worldwide Business Research in collaboration with Olapic, 90% of retail leaders using this “earned” content in their campaigns are seeing measurably positive results. In short, consumers are looking to one another for inspiration and to spark loyalty. By enabling this trend for your audiences, you can reap the benefits of today’s consumer-to-consumer (C2C) marketplace. 

Want some foolproof tactics to utilize this content? Read our 4 Tactics to Drive Traffic and Sales With User-Generated Content.

Final Word

How are you working to turn your one-time shoppers into repeat customers? While these are just a few strategies to get started, it’s most important to choose an initial strategy and drive toward it confidently. From there, you can build a more sophisticated engagement strategy in time.

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.

customer lifetime value FAQ

What is customer lifetime value formula?

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 for calculating CLV is: CLV = (Average Value of a Sale) x (Number of Repeat Transactions) x (Average Retention Time in Months or Years for a Typical Customer).

What is the difference between CLV and LTV?

Customer Lifetime Value (CLV) is a metric that measures the total value of a customer to a business over the course of their entire relationship. It takes into account the total sum of all purchases and other activities a customer has done with the business. Lifetime Value (LTV) is a metric that measures the total revenue a customer is expected to generate over the course of their relationship with the business. It takes into account the current purchase and future purchases, as well as the value of referrals and other activities a customer may generate. Unlike CLV, LTV does not include costs associated with acquiring the customer.

How do you calculate lifetime value?

  • Calculate the average sale or purchase amount for a customer over their lifetime.
  • Calculate the average number of transactions or purchases a customer makes over their lifetime.
  • Calculate the average customer retention rate or lifetime.
  • Multiply the Average Sale or Purchase Amount by the Average Number of Transactions or Purchases to get the Average Lifetime Value.
  • Multiply the Average Lifetime Value by the Customer Retention Rate to get the Lifetime Value.