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Customer lifetime value in ecommerce 101

Customer lifetime value is proving to be one of the most important ecommerce metrics. More and more online brands discover customer lifetime value as an indicator of brand loyalty, stable financials and possibilities for growth. We’ll see why in a bit.

What is customer lifetime value?

Customer lifetime value is the total amount of money someone spends with your brand over the complete period of their customer lifetime. This is from their first purchase ever to the last one before they drop out as a customer and never shop from you again.

13 Emails that drive customer lifetime value up

Emails that drive repeat sales are the best emails. Forget about basic email marketing that teaches you to send promotions every week or touch base with customers more often, e.g. every day.

To see a real return on marketing, you need to use email to its full potential – it’s a (nearly) free marketing channel that you own and have complete control over. No pay to play like ads. Emails for customer retention are the best way to drive revenue without extra spending.

Customer lifetime value is the best indicator for a healthy business.

Customer loyalty is usually based on a strong connection with the brand and a positive experience. Emails that drive customer loyalty keep this relationship going through useful, timely and relevant content and offers.

Casper has only 20% retention rate

Aron Levin went over Casper’s S-1 filing (preparation for IPO) and his verdict is “Casper is screwed”. That seems harsh for the poster child of DTC brands, but Levin presents his findings and the financials don’t look good. At least Casper’s growth looks unsustainable.

Why is that?

“20% of direct-to-consumer orders in 2019 came from repeat buyers.”

Also, in the documents, the company says it increased its advertising budget by 23% in the last year (before filing for IPO).

This means they increased their investment in marketing and still got only one-fifth of orders from old customers. Adding the fact that Casper relies immensely on brand awareness and it turning into brand loyalty, things are looking weird.

Are you setting fair prices for your ecommerce brand?

When doing research and benchmarking your products, do you wonder how your competitors decide on a price and how customers choose between differently priced products? What is a fair price to you?

There is a behavioral pattern behind a buying decision-making process. Customers are bound by reference prices from past experiences that they have internalized. When they judge the fairness of a price, they benchmark with these internal reference price points.

Besides, they are all too familiar by now with the old trick of crossing out a higher price and presenting the actual one as a discounted one. This is illegal in the European Union, for example.

So let’s dive deeper and find better ways of pricing your products fairly.

How to reduce returns for ecommerce clothing brands

Ecommerce returns are expected to reach $550 billion in 2020 in the US alone. With 29% of orders being sent back, apparel is the category that most urgently needs to work on reducing returns.

Returns have negative effects on:

  • Your operations – they cost you labor and time
  • Profitability – they cost money
  • Customer reviews – any negative comments found online might cost you new customers
  • Team morale – your employees might get demotivated after working on the items

Clothes brands may understand returns are an inevitable part of their business, but it doesn’t have to hurt your profitability. Keeping returns to a minimum will save you operating costs, time, and unhappy customers.

We gathered quite a few tactics to reduce returns.

How to get better returns on your holiday marketing money

The holiday season has most probably drained your marketing budget – ad costs are sky-high because of the fierce competition. That’s why it’s worth a try to get a better return on the money invested.

If you get your holiday shoppers to shop again, those purchases will get you a higher profit margin than the first (if you even managed to make any) and most likely offset the cost of acquisition. We outline a few ways to do that in this piece.

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