Digitalization and globalization have allowed companies to connect with consumers throughout the globe. However, it would be best to have specific marketing campaigns to get people’s attention and let them hear your voice on the marketing message. LTV or lifetime value is a metric that helps in measuring the amount you could expect to earn from your customers. You could use your existing data and find out on average how much each person spends on your e-commerce website.

For example, if a consumer spends $50 and remains your loyal buyer for four months before leaving, then the lifetime value of that customer is $200. In marketing, LTV is a crucial metric because it helps you to know whether your cost of acquisition of customers(CPA) is acceptable or not. For example, if you spend $250 to get your customer, as mentioned earlier, you are having a loss of $50 in the long run.

There are many other factors like website visitors, bounce rates, click-through rates, conversion rates, and micro-conversion rates, and surprisingly all of them are crucial. However, lifetime value helps you justify your spendings on digital marketing campaigns.

Is LTV a crucial analytics metric?



customer lifetime value

Lifetime value or LTV helps you measure the long-term value of a customer. The seasonal fluctuations or visitor spikes are short-term metrics that cannot paint the picture of whether the business is focusing on real success. For example, suppose you have a budget for brand awareness, lead generation, and final stage customers, then you could get your CPA by measuring the total amount spent divided by the number of new customers.

It is now the time to check how much each customer spends and whether it is promising to spend such value or amount on CPA.

Your customer lifetime value is the multiplication amount of the following factors:

Average Lifespan of a customer(in years) * No. of purchases made each year * Average value of each transaction.

LTV helps you analyze the bigger picture and the average return on every customer, with the help of which marketers could check how many visitors you need to achieve your business financial goals. Moreover, you could use multi-channel marketing to influence your buyers buying decisions by embedding your brand’s message in the customers’ minds.

Why having a customer persona in mind is crucial to improve your LTV?


customer persona

Decide your customer persona

The digital world is competitive, which makes it difficult for companies to engage with their preferred audience. One common reason is that companies don’t understand the pain points of their target audience and don’t have a proper data-driven customer persona in mind.

Many marketers complain about the return on investment or return on advertising spend to be comparatively lower on a given social media platform or digital marketing channel. However, it means that the target audience might not be using that social media platform to communicate with brands. Such an error could increase the cost of acquisition of customers, which ultimately reduces the profit amount of each customer for the brand.

Hence, it is vital to target the right audience and have a customer persona and the empathy map to communicate with them and dictate the brand message to them. If you have the right audience who needs your product, there is a good chance of increasing the retention rate. A study conducted by Bain & Company found that a 5% increase in the retention rate can increase profit between 25% to 95%.

Customer Lifetime Value Formulas


Customer Lifetime Value Formulas

Customer LTV formula

STEP 1: Average Purchase Value= Total Revenue / Number Of Orders

STEP 2: Average Purchase Frequency Rate= Number of purchases / Number of customers

STEP 3: Customer Value= Average Purchase Value * Average Purchase Frequency Rate

STEP 4: Average Customer Lifespan= Sum of customer lifespans / Number of customers

STEP 5: Customer Lifetime Value = Customer Value * Average Customer Lifespan

Five tips to improve LTV for an e-commerce business



1. Focus on email marketing by sending valuable newsletters to the people who have subscribed to your email campaigns.


email marketing

email marketing

Email marketing is one of the most important digital marketing channels with the highest return on investment, $42 for the expenditure of one dollar. Most of the customers are not at the final stage of the buyer journey. Hence it would be best if you had pop-ups, both entry and exit, to collect the emails of your website visitors. Once you have the email address of your potential buyers, you could send them informative and engaging newsletters to remind them about your brand and get higher value from each customer.

You could send promotional emails to your customers regarding your offers and discounts to entice them to buy from you. As the buyer has already subscribed to your newsletter themselves, it means they are interested in your products and maybe a good fit to offer discounts. This way, you also nurture the leads, remind them about your existence in this competitive digital world, and increase touchpoints and conversations between the brand and the customers.

The top CRM tools in the market could also help you segment your customers based on their behavior. Hence, you could shoot a targeted email to customer segments and leverage the most out of your emails.

2. Upselling and cross-selling to increase the overall purchase value


upsell and cross-sell

upsell and cross-sell

Cross-selling refers to the process of suggesting relevant products that people could buy along with the main product. For example, if you were trying to purchase a mobile phone from an online e-commerce store and you are suggested screen protectors for that model, it is an example of cross-selling. Upselling means persuading the customers to upgrade their product and buy the expensive version of it. For example, suggesting Apple iPhone 13 pro max when you search for Apple iPhone 13 mini.

Please don’t be pushy with the offer. Otherwise, it could frustrate the buyer. You must ensure that your upsell is relevant and the recommendation is personalized. You could try other factors like using urgency and offering free shipping to excite buyers. You may also limit the price increase and provide social proof to let the buyer trust you. One another important factor is following up via email after the buyer has purchased something from you.

3. Ensure that your customers get the right customer service


Customer Service

Customer Service

It is easier to sell to an existing customer, and if you have a 5% increase in retention rate, you could have around 25 to 95% improvements in profit.

If a customer is retained, it directly translates to more purchases, resulting in a higher lifetime value. The best way to satisfy your customer is by providing them good customer service. You must have a dedicated team so that no phone calls or email gets unanswered. Listen to your customers and focus on the areas that need immediate attention from your side to improve customer experience. You could also try giving discounts for loyalty, as it would promote the buyers to be with you for a longer time. Looking to register on Amazon? Here is Amazon brand registry to-do list.

4. Increase touch points with the customer




One of the most vital parts of increasing a customer’s lifetime value is to identify the goal which the customer wants to accomplish. Then, you could use empathy maps to know what the customer might be feeling or thinking and use this data to try to find out the potential ways to enhance the touchpoint. To measure the return and make optimization, specify the key performance indicators for your campaign.

Suppose a customer is trying to shop online on your e-commerce site. You could use AI chatbots to actively engage with the customer and assist them at every stage. But, unfortunately, the shopping cart abandonment rate also increases if a customer can’t find a quick answer to their question, which could be solved by a chatbot.

Social media strategy (for example Pinterest marketing) could also help you in customer acquisition as social media is a cost-effective way of reaching a large portion of your target audience. In addition, digital marketing content like promotional videos, infographics, or engaging blog posts could also help in generating brand awareness and acquiring customers at a lower cost. Have a look at digital marketing vs traditional marketing.

If your product is awesome, you have a great opportunity to earn peer referrals. Thank you letters, product feedback surveys, up-selling emails, etc., are other ways to increase brand awareness and gain the audience’s trust.

5. Improve user onboarding process to improve the lifetime value of a customer


user onboarding process

User onboarding process

Source(Image): HubSpot

Customer onboarding is the process of nurturing your new users and making them comfortable with your product so that they come back again and purchase from you. For example, you could focus on steps like unlimited guidance and support, step-by-step tutorials to make customers feel happy while using your product. It is important to focus on the customer onboarding because most revenue comes from existing customers, and the happy ones could become your top referral sources. Here are digital marketing best practices to improve results.

A user onboarding process could include strategies to get the users to use your product more than once within the first week and establish a usage pattern. Once your customer makes a purchase, you could send a welcome email and a greeting message to make them feel special. If your product needs a setup, you could create guided setup tutorials to improve user onboarding. Set clear expectations and show the value to your customers. Email marketing could help you stay in constant communication and impress them with your knowledgeable newsletters. You must create customer-centric goals and measure your success based on customer retention. Here is how you could optimize customer journey for e-commerce business.


Lifetime value estimates the average, data-driven forecast on how much revenue a brand could generate from a customer. This value could help a company have a clear set of expectations and make important economic decisions, including marketing budget, resources, profitability and forecasting. Read this complete guide on voice search optimization to optimize your website.


About the author:

We are Codedesign – a multi cultural, technology, award-winning digital marketing agency. We can be define as a result-led, innovative digital marketing agency specializing in Digital Marketing, Ecommerce, Online Sales, Amazon Sales with a team of experts in Search Engine Optimization (SEO), Pay Per Click Strategy and Campaigns, Social Media, Content Marketing, Data Analytics, Ecommerce development, Software development, CRM integrations.