April 21, 2017
E-commerce  |  7 min read

4 Ways to Increase Lifetime Customer Value with Automation

In the classic movie “Gremlins,” the hero is warned to not get the furry critter wet after midnight, or they would multiply. As an e-commerce business owner, you can be left wishing for your own secret formula to multiply customers. After all, customer acquisition can be expensive. However, smart retailers are looking for ways to acquire higher revenue and profits from their existing customer base instead.

Automation can do a lot of the heavy lifting that makes this possible—and it all starts with a focus on two key metrics: average order value (AOV) and customer lifetime value (LTV).

First, definitions

When you’re an e-commerce business, it’s important to look at sales, revenue, and profits. But ultimately, these metrics only tell you one part of the story. It’s also important to push further on the data to understand whether you’re making the most of your existing customer relationships—and that’s where AOV and LTV come in.

Average order value tells you how much your typical customer spends. Is your business doing thousands of transactions with customers who just spend a few dollars or fewer transactions where customers spend their whole paycheck with you? One way to increase both revenue and profits is to lean into each transaction and explore different triggers that get people to spend more money. No additional customer acquisition costs, yet the possibility of higher profits.

Customer lifetime value tells you whether customers are consistently coming back for more. Do people buy a product or service from you and then disappear, or do they come back time and again each time they purchase something in your category? The answer speaks to the quality of your relationship with your customers, and working to cultivate this over time can provide a ready audience for new products and services, as well as always keep your inventory moving.

The role of automation

Conversion testing has routinely shown that small tweaks, a simple email and other factors can increase your average order value or get a customer coming back from more. However, it’s impossible to deliver that at scale—until you look at automation. With the right systems in place, it’s possible to increase both metrics seamlessly.

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Increase AOV with customized product recommendations

Automated product recommendations use data about past buying behavior—or simple associative product data that you put into your e-commerce system—to automatically suggest related products. Amazon is the pioneer of this process; in many ways, they are actually the world’s most sophisticated e-commerce engine, rather than a retail outlet. If someone purchases a mystery book by a specific author, the system can recommend other titles that author has written or another author that’s popular with fans.

If a customer is buying a new rug from a home décor store, it’s possible to recommend matching curtains or a coordinating couch cover. Use customized recommendations on the product page, during checkout, or in follow-up emails to guide your customers to products they’re interested in purchasing.

Bump up AOVs with a bundle

Bundling products together makes it less expensive to purchase items as a package deal, as opposed to buying them individually. It’s the classic approach taken by telecommunications companies that bundle together services like cable, television, and internet for maximum value. You might not really want the landline, but it makes the products you really do want (hello, HBO!) more affordable. The same concept can be built into the way you market your products.

For example, an electronics shop might sell different pieces needed to podcast: a microphone, headset, and mixer. Individually, these items might cost $100 each, but be available together for $225. In order for bundling to work, it’s critical to understand customer behavior and know which products naturally integrate into a purchase that makes sense. Bundling strategies can drive up your AOVs as customers who arrive with one purchase in mind realize it makes more sense—or is simply easier—to purchase the other items at the same time.

Increase LTV with cyclical remarketing campaigns

Often, the items we buy are things we’ll buy every few weeks or months. Perhaps the products require parts or can be made more interesting with add-ons (get the greatest pet hair attachment your vacuum has ever seen!). Think about ways to circle back cyclically to your customers to meet their needs, before they go to someone else. Systematically determining the right intervals and timing to reach out can make you the go-to source for consumers on a particular issue. Examples include:

  • Tax preparers that email past customers and leads around January 31 every year, reminding them to set up an appointment to file their taxes or get an early refund.
  • Manufacturers emailing customers that use HEPA air filters, reminding them to purchase replacement filters every quarter.

Run automated upsell campaigns

A classic upsell is simple: a customer buys a less expensive item and eventually begins to purchase more expensive items. They buy an inexpensive wine from a vineyard and soon are investing in the premium product. Or a consumer starts with a business book and then is spending thousands on an in-person seminar or one-on-one coaching. With automated upsell campaigns, businesses take the time to map out their product progression—and then guide buyers through it with automated emails. For example, in the business strategy example, a purchase might trigger the following email sequence:

  • A customer purchases a specific book
  • A day later, you send an email with a discounted upsell offer to join an online subscription community with a monthly fee
  • Once they’ve been a member of the community for two weeks, they’re contacted via email by a customer success manager who offers them a spot in an exclusive coaching program that provides one-on-one access to the thought leader
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The whole sequence can automatically leverage an email campaign to keep in touch with the customer and use their yes or no response to any given offer to trigger the next step in the sequence.

Finding ways to better serve the customers you already have—and by extension, making more money—is good business sense. Automation can make it possible to maximize the value of every transaction with a simple upfront investment. From creating automated upsell sequences to using automated, personalized product recommendations, you’ll see an increase in revenue and your customers will find interacting with you more valuable.

No water after midnight required! 

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