How to Increase Customer Lifetime Value on Shopify Plus

  • Strategy, Technology
  • December 15, 2022
  • by Andrew Robinson & Amy Lightfoot

It’s no secret that it was already expensive to acquire new customers. But with changes to the privacy landscape - such as the downward spiral of Facebook ads and the “death” of third-party cookies - the cost only seems to be increasing. While the situation may seem daunting, we’re here to help. In this article, we’ll walk you through e-commerce strategies to help you maximize your customers' loyalty and lifetime value, as well as how to acquire new ones for less.

Build a community

Spending is tight for everyone with the financial impact of the global recession, so customers are reducing spending where they can. Therefore it’s more important than ever to give customers a compelling reason to part with their cash. One of the best ways is to build a strong community around your products or services. A sense of community can help shift customers’ perception of your products from ‘nice-to-have’ to an integral part of their lifestyle or identity. This shift can significantly prevent your product from ending up on the chopping block when customers want to cut back. 

Live video

A great way to build your community is to use live videos. By “going live” on platforms like Instagram, TikTok, and Facebook, you lift the curtain and allow your customers to see the faces behind your brand. This personal touch helps build authentic relationships between you and your customers and shows them you’re more than marketing and a shiny storefront. Of course, this works best when brands aren’t afraid to show the good, the bad, and the ugly - the goal is to offer real life behind the scenes, and real is rarely perfect. 

While there are a lot of platforms on which you can “go live,” we are particularly fond of Bambuser. Their live video platform integrates directly with Shopify. It allows users to buy without having to navigate away from the video, post questions, and get responses in real time. This seamless integration allows your team to use the videos to highlight new product launches, provide essential product information, and engage with your customers. For example, Fashion merchants can use this feature to show products from their latest range, how they fit, and how to style them. Skincare merchants can show customers which products to use, when, and how much to use. This information also helps inspire customers and removes any questions or uncertainties blocking them from buying.

We’ve seen the success of this customer engagement first-hand. When our clients implement live video, they build meaningful relationships with their customers and enrich the brand perception.

Take our client Toast, for example. We implemented a ‘Toast Live’ landing page, accessible via the footer, which houses all the details about upcoming shows and links to the previous ones. So users can go back and watch any videos they missed. 

We hooked the Bambuser player into the native Shopify cart functionality via their cart integration to allow users to buy straight from the video. Finally, we set up the Bambuser conversion tracking to track the ROI the feature was generating. The integration was relatively quick, and the results have been profound.

Referral programs

Now that you've started building an authentic relationship with your customers, you can turn your most engaged customers into ambassadors with a referral program. Implementing a solid referral program is a great way to bring in potential customers who are already primed to trust your brand by hooking into people's natural propensity to purchase products they've seen their friends or family using. According to Nielsen, 92% of consumers say they trust earned media - such as word-of-mouth or recommendations from friends and family - above all other forms of advertising. Moreover, that trust seems to rise steadily over time, with an increase of 18% since 2007.

While there is space for paid advertising, you cannot discount the value of a personal referral. A successful referral can slash the cost per acquisition and increase the new customer's lifetime value. Referral provider Mention Me reports on average referred customers:

  • Spend 11% more on their first order

  • Have double the lifetime value of non-referred customers

  • They are 5x more likely to refer others themselves, multiplying their value even further.

Naturally, referral programs aren't a one-size-fits-all for every brand. But, there are a wealth of options on Shopify to suit your needs, from smaller-scale apps to enterprise-level solutions like Mention Me, LoyaltyLion, and Yotpo.

We recently implemented a Mention Me integration for Jigsaw to power their new referral scheme. Visitors can navigate to a dedicated page and sign-up to make a referral. Once signed up, they can visit the section in the My Account area of the site, which hosts the dashboard where referrers can track the status of their referrals. 

At checkout, customers can click on the text "Been referred by a friend? Click here," which opens the referral modal and harnesses Mention Me's 'Name-Sharing' feature (allowing the customer to add the name of who they were referred by – triggering the reward for both parties).

User-Generated Content

While a personal referral is a direct purchase invitation, not all your customers will take the time to provide one. Instead, most of your customers are likely to share a positive experience or product on social media. These posts are referred to as UGC and are becoming increasingly common as an antidote to the rising cost of influencer marketing. 

This type of content allows your potential customers to see how your products might fit, be styled, or fit in as part of their lifestyles by seeing them used by other real customers similar to themselves. This makes them another powerful tool to build a solid community around your brand. In addition, seeing this kind of content posted naturally by others helps transition the perception of your products from optional to aspirational.  

The report “Bridging the Gap: Consumer & Marketing Perspectives on Content in the Digital Age,” published by Stackla, highlights some of the impressive stats associated with UGC.

  • 51% of consumers say they’d be more likely to continue engaging with and/or purchasing from a brand if it shared their photo, video, or social post across its marketing channels.

  • 56% of consumers say user-generated photos and videos are the content they most want to see from brands.

  • 90% of consumers say authenticity is important when deciding which brands they like and support, and consumers are 2.4x more likely to say UGC is authentic compared to brand-created content.

The same report found that consumers find UGC 9.8x more impactful than influencer content when purchasing. As brand and influencer partnerships have become increasingly widespread, consumers have become increasingly aware that it’s a paid promotion and not necessarily a reflection of the influencer’s actual use of, or feelings for, that product.

Companies tend to partner with influencers due to their large following and influence in their particular market or demographic. However, despite being a common marketing technique, brands have found that - somewhat counterintuitively - as an influencer grows in following (and therefore cost), the efficacy of their promotions doesn’t necessarily grow too. This is partly due to the influencer’s audience becoming more general as they grow and, therefore, no longer as targeted to specific types of products. As a result, brands can pay large sums of money for promotions that yield lower ROI as their paid promos are being shown to users who aren’t as interested. 

The combination of declining consumer trust in influencer promotion, rising influencer cost, and disappointing ROI is paving the way for an accelerated takeover by UGC as brands’ go-to tool for promoting their products. Luckily for Shopify merchants, there are plenty of options for apps and integrations to help them easily harness it, including Yotpo and Foursixty.

A great UGC integration is the ‘Shoppable Instagram & UGC’ app by Foursixty. We implemented this on Skinnydip to power a page that pulls through Instagram posts where users have tagged the brand. Shoppers can hover over any image on the page and add products to their cart, including selecting the size, color, and other variants, without having to navigate to the PDP . We also pulled through a small selection of Instagram posts to the homepage to place User-Generated Content front and center. 

Subscriptions

Subscriptions are one of the strongest ways to increase CLV . They make life easier for customers by allowing them to “set and forget” a recurring purchase of products they buy frequently. In addition, it will enable merchants to maintain consistent revenue, making subscriptions a win-win.

The trick to an effective subscription program is providing a solid incentive for customers to subscribe while making it as easy as possible for them to do it. Something as simple as calling out the benefits of subscribing in convenient places - such as a button in the cart to upgrade to a subscription for a discount - can be a compelling way of converting an order from a one-off to recurring revenue. 

With the current economic climate, customers are cutting back on non-essential purchases and re-evaluating subscriptions. According to Barclaycard, one in five people are reviewing or canceling subscriptions. A canceled subscription doesn’t just spell lost revenue for merchants in the short term – it can mean a permanent loss of previously loyal customers. Canceling and renewing later offers customers the perfect opportunity to shop for alternative subscriptions.

Thankfully for merchants, Recharge - a subscription software provider that integrates directly with Shopify - has just released a solution via their ‘pause subscription’ feature. Merchants can now enable a setting that fires a modal when the user clicks the ‘cancel’ button within the customer portal, which asks them if they’d instead pause their subscription. This strategic placement of the pause functionality within the cancellation flow can be a vital addition to a merchant’s customer retention efforts, so much so that it’s a technique used by subscription giants like Audible.

Increasing AOV

So, you’ve started building a community of loyal customers and securing recurring revenue via subscriptions. Now, you’ll want to shift your focus to increasing the AOV , as even a small increase in AOV can significantly impact the overall lifetime value of a customer.

Bundling

Bundling is a great way to provide your customers with a frictionless shopping experience while increasing AOV. By creating a single product page for multiple products, you are limiting the effort needed to search for complementary products and encouraging customers to increase the value of their purchase. 

This is particularly impactful for merchants operating in industries with a learning curve; new customers can find industries like skincare, beauty, health & nutrition, and wine & beer initially overwhelming. It can be challenging to know where to start, which kinds of products they’d like or would be suitable for their specific circumstances, and which ones to pair together. 

By offering a variety of pre-built bundles for different use cases, interests, and circumstances, you can cut straight through the barrier of conversion and give your customers the confidence they need to make a purchase. Couple this with discounts on the bundles versus buying the products individually, and offer subscriptions on any bundles customers regularly buy to ratchet up the effectiveness.

Upsells and Cross-sells

Another technique to increase AOV is offering upsells and cross-sells throughout the customer journey. Supermarkets are masters of this; we’ve all thrown something into our basket that was never on our shopping list because they strategically placed it next to a complimentary product that was. Merchants that successfully replicate this on their online store can benefit from the same behavior.

A significant key to success here is to make sure any cross-sells are relevant to what the user already has in their cart; showing a recommendation for a pair of shorts to a user buying a winter coat probably won’t work too well. We were mindful of this when implementing cross-sell functionality for our client Pure Electric - add a scooter to your cart, and you’ll see recommendations for tire pumps and phone holders that clip onto the scooter’s handlebars. 

We were also careful to surface the recommendations at the right time to ensure we were injecting recommendations as the user added a complimentary product to their cart. Showing product suggestions too soon or too late in the buying journey can cause customer frustration rather than being helpful and encouraging them to buy more.

Merchants should also consider sending an automated email to offer customers a discount on related products to one purchased. Selling printers? Send a customer an email offering a discount on ink when you think they'd run out. Selling clothes? Offer a discount on gloves to match the coat they bought. These timely, personalized recommendations are more effective than blanket emails pushing products unrelated to customers' past purchases.

How to track CLV 

After all this effort to improve your customer lifetime value, naturally, you'll want to assess the results you've gained from your hard work – Shopify makes it easy for you to see the basics:

  • First, click on the 'Customers' section in the admin.

  • You'll see a complete list of customers, the number of orders each has made, and the amount each customer has spent with you.

  • Clicking on each customer will show you more, including details of their orders and AOV. 

If you want to dig deeper, apps like Lifetimely connect directly to Shopify and reveal additional insights like the average gap between purchases, the top products, discount codes and tags that positively or negatively impact lifetime value, and even a report on projected future lifetime value for any customer segment. This can help you make data-driven decisions around your products, activity, and how much to spend on each customer acquisition. 

Conclusion

In the current economic climate, it's important to remember that your customers are feeling the pinch. However, if you make the time to create authentic connections with them and instill a real sense of community during a challenging time, you can foster a fiercely loyal customer base that can sustain your brand through whatever might come next.

To help guide your CLV strategy, reach out to our expert team, who can work with you to add features we've mentioned that work and make sense for your e-commerce store and customer base. 


Authors

Andrew Robinson

Andrew joined We Make Websites in 2021. He joined with a strong background in both Project Management and Account Management, having worked at numerous award-winning full-service and digital agencies. He's worked across a host of e-commerce platforms, from Magento 1 and 2, Shopware, BigCommerce and Shopify and has delivered a large number of successful projects for happy clients.

Amy Lightfoot

Amy joined We Make Websites in 2020. She has a MSc in Information Science and has worked in product management across a variety of industries including FX trading, academic research, and e-commerce. In 2022 Amy moved over to our Solutions team to get stuck into the technical side of projects.


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