What is customer lifetime value?

We all stumble through life clutching onto the fuzzy memories of those pesky Pythagoras and algebraic theorems that haunted many a youth, and—with rare use cases in present day life—they normally end up getting filed and forgotten. 

Enter customer lifetime value: the only equation you need to remember.  

In ecommerce, CLV is the value a customer contributes to your business over their entire lifetime at your company.

The main methods of calculating CLV are split between historic and predictive CLV:

• Historic CLV (Good indication of CLV)  

  Simply the sum of the gross profit from all historic purchases for an individual customer.

• Predictive CLV (Great indication of CLV) 

  A predictive analysis of previous transaction history and various behavioural indicators which forecasts the lifetime value of an individual. As long as the equation is accurate, this value will become more accurate with every purchase and interaction.

Great marketing campaigns emanate from a solid initial strategy. As Benjamin Franklin once said:

“Failure to plan is planning to fail”

So in this post we will show you how to create a killer ecommerce marketing plan to drive your ecommerce business ahead of your competitors.

In order to give some context to each section, I’ll be giving you excerpts from the marketing strategy for a fictitious ecommerce company in the fashion industry called ‘Danakil’.

The customer acquisition cost (CAC or CoCA) means the price you pay to acquire a new customer. In its simplest form, it can be worked out by:

Dividing the total costs associated with acquisition by total new customers, within a specific time period

Do not get this metric confused with cost per action (CPA), as there is a strong distinction between the two. In ecommerce, cost per action is typically the amount you pay to convert a customer (i.e. to make a sale), but this relates to both new and returning customers.

CAC is all about acquiring new customers. See how even Google refers to CPA as ‘the cost you are willing to pay to make a conversion’ NOT to acquire a new customer.

Product pages aren't just a pretty landing page for purchasing. They are your online doorway to gaining customers and revenue.

We'’ve deconstructed the outstanding features on each of the chosen sites (and spotted some other key areas for improvement).

This post is designed to help you keep up-to-date with some of the latest trends, using examples from the top ecommerce product pages out there today.

Enjoy. 

This post covers customer lifecycle marketing, a vital strategy to maximise profitability for any ecommerce store.

It is intended for ecommerce marketeers, Heads of Ecommerce or anyone running an ecommerce store. You will learn the fundamentals and tactics behind becoming a lifecycle marketeer. Move forward with the skills necessary to increase revenues and customer satisfaction by targeting and nurturing customers effectively at every stage of development.