LTV, or Lifetime Value, is the metric of a particular user, client, or customer’s worth to an ecommerce business from the time they begin using a product or service to the time they churn. It shows how much is spent on acquisition, retention, engagement of a customer, and how much income the company receives from all this in the context of ecommerce LTV. This term may have several designations – LTV, CLV, or CLTV. However, the essence of all of them remains the same – the profit that an ecommerce business receives over the entire period of dealing with a client. If the company’s efforts cost more than the profit obtained from a client, then the ecommerce business operates at a loss. That’s why measuring LTV is crucial for increasing profitability in the ecommerce sector.
Benefits of LTV for eCommerce
- When you understand who brings you the real profit, you can target the audience to take the most advantage of.
- Develop personal offers for each target audience group.
- Improve your customer retention strategy.
- Understand the behavioral factors of the audience.
How to calculate LTV for eCommerce
In its simplest form, LTV equals Lifetime Customer Revenue (LCR) minus Lifetime Customer Costs (LCC):
LTV= LCR – LCC
For example, if a customer purchases $500 worth of products or services from your business over the lifetime of your relationship, and the lifetime customer cost is $250, then LTV is $250.
A more complex formula implies that LTV is the Average Order Value (AOV) multiplied by Repeat Purchase Rate (RPR) and Lifetime:
LTV = AOV x RPR x Lifetime
For example, the Average Order Value in an online store is $700, regular customers purchase goods 4 times a year, you calculate the Lifetime Value for 3 years.
LTV = 700 x 4 x 3 = 8,400.
In this case, we can compare the LTV value with the cost of customer acquisition to understand how profitable your business is.
This formula is predictive in nature. You cannot say for sure whether the client will be with you for 3 years or not. However, this calculation is good as a guideline for improving your business goals and customer service. The higher your LTV, the stronger your marketing is.
Let’s determine how to increase each parameter to get a higher LTV.
How to increase customer LTV
We’ve just examined the components that LTV is made of. Obviously, working carefully with each component, you improve LTV.
How to increase AOV
Bundle your offer
Make buying a product set more lucrative by adding a discount for a set or a related product. The price of the set is cheaper than if the buyer took all the goods from the set separately.
Show cross-sell and up-sell products, down-sell
These techniques are the sale maximizers. With up-sale technique, you sell a more expensive product to customers, convincing them that they will get an extra product for an additional small amount of price. Cross-sale implies suggesting related products to a customer who is about to purchase something with you. With the down-sell technique, you have to offer a cheaper product, which has a better chance to be bought, because selling something is better than nothing. To implement these techniques, you place your up-sale/cross-sell/down-sell offer on the product page, in the cart, on the checkout, on the Thank You page, or in the email newsletter. Or you can use pop-ups to induce sales or offer an upsell.
Increasing RPR
Provide time-sensitive deals
This phenomenon is known as FOMO (fear of missing out). When you set a time limit, your customers will better realize the value of the offer as it may soon disappear from the shelf.
Work with the Return Path
Return Path is a product that brings you repeat purchases. It solves one of the customers’ most acute pains making them come back to you again and again.
Offer new collections
Customers should not see the same storefront every day. Update it. Place banners once a new arrival is available, show labels on the category page. Drive your audience attention with something new.
How to increase customer lifetime value and boost profits
Mail news
A person sees your letters in the inbox, remembers the company and, eventually is more willing to contact you to look for other offers. The newsletter needs to be segmented and personalized to enhance the impact of the emails.
Apply loyalty programs
How would you know if your customers are satisfied? The simplest option is to ask: “Would you recommend us to your friends and colleagues?” This technique is known as NPS – Net Promoter Score, the percentage of customers rating their likelihood to recommend a company, with a score from 9 or 10. Collecting this data isn’t easy, but it’s worth it. Try to personalize communication with the target audience, make lucrative offers to each group of customers: regular customers, “newbies”, and partners. Then, in 90% of cases, they will help make the company better and answer the test questions.
Engage with post-purchase messaging
Don’t leave your customers once they have completed their purchases. Drop them a line to ask whether they are fully satisfied with your product or service. Loyalty is all about care.
Be accessible when your user needs
Attracting new customers is expensive, even for large companies. It is more profitable to retain existing customers. Having a proactive customer care department can help communicate with customers and keep them with you.
Advantages of mobile apps in increasing LTV
Mobile apps are one of the ways capable of combining all the leverages to increase LTV. They cover all the LTV triggers and can be used to engage, retain, support your customers, up-sale and cross-sale the product/service you offer. Mobile apps do an excellent job of increasing the frequency of purchases and extending the customer’s lifespan. They remind of themselves and are 24/7 available with 1 click with your customer.
Moreover, according to Monetate, the global smartphone traffic is 56.2%, when the desktop is about 34.5%, and tablet is about 4%. Without mobiles, you won’t have the same amount of conversions on your site.
Therefore, a mobile application is a great growth point for your business.
Plus, mobile apps:
- Can act as gentle reminders to pull your customers back to your business;
- Help to capture consumer insights to build a more personalized approach;
- Can be a separate channel to communicate with your audience to increase brand awareness and loyalty;
- Respond to the challenges of our time (they are faster to load on a device and have a concise interface).
Ways to create a mobile app
There are multiple ways to build an app for your online store or marketplace. All of them differ by the cost and complexity. Let’s examine the most common ways.
Native app
That means you create a native code with Java for Android and Swift for iOS separately for each device. It’s not easy as you will have to maintain two codebases. Native apps have the native UI and are more user-friendly. They are easy to discover in app stores. Planning building a native app, expect spending an amount from $50,000 to $100,000 and above for one app. The cost will depend on the app complexity. The more feature-rich it is, the more complex is its development process, and the longer it will take to develop. On average, it may last somewhere up to 9 months depending on the structure of your project. Each development stage takes different amounts of time to complete:
- Project brief: 1-2 weeks;
- Concept examination with developers: 4-5 weeks;
- Design: 6-12 weeks;
- Development and prototyping: 6-12 weeks;
- Deploying to the app store: 2 weeks;
- Continuous improvement and post-release support: ongoing.
The more seamless the overall process is, the better will be the final result and the quicker is its launch.
Hybrid app
A hybrid app can be built on the basis of web pages that are rendered within an app container (like WebViews). It relies on a ‘bridge’ to communicate with native services, which can affect performance. It has one code base, is cheaper in development and is faster to enter the market. On average its development requires investing $5,000 – $100,000 for one app. The cost depends on the project complexity and number of items in your store.
- Simple apps with minimum functionality usually require spending from $5,000 to $20,000.
- For a medium-complexity hybrid app, the cost of development may take from $20,000 to $70,000.
- A complex app will take plus $70,000 – $100,000 of your budget.
Progressive Web Apps
Mobile development moves away from the native apps towards mixed technologies. Nowadays, web APIs allow much more extensive interaction between web pages and devices and service workers enable caching pages to work offline. The latest technology that brings you all the benefits of mobile apps without developers’ assistance was named as a Progressive Web App. Google has already given an ability to add your page to the home screen as PWA does. If you want to have a close-to-native feeling of an app, you will need a fully functional PWA store. PWA releases you from building an app from scratch, allows its offline use, adds your unique logo to users’ mobile devices’ home screens, and you don’t need to pay a fortune for it. Progressive apps gain popularity as their development can be less expensive as compared to the native and hybrid apps. According to open data available on the web:
- The average cost of a simple Progressive Web App (PWA) lies between $1,000 and $10,000.
- The medium-complexity app will cost from $10,000 to $25,000.
- A complex and feature-rich PWA may take from $25,000 to $50,000.
At this, the time of development is shorter than the same in the case of native/hybrid app development. On average, it takes up to 5 months to build the visuals and the backend, but everything depends on how complex your project is:
- A content-based light PWA with the database backend – 2-3 months.
- A medium-complexity PWA with social media features, in-app purchases, logins, favorites, backend admin panel – 3-6 months.
- A complex app with dedicated analytics, sophisticated functionality, trading options, visualization patterns, and integrations with other services – 6+ months.
Advantages of PWAjet, the SimtechDev’s PWA solution
PWAjet is the PWA solution for CS-Cart and Multi-Vendor users. It is super-quick to launch as it is already pre-built and pre-configured taking all the peculiarities of the CS-Cart platform into account.
With PWAjet, you get all the advantages of a mobile app, plus:
- Feeling of a native app;
- Add to home screen feature;
- Offline use if the page has been preliminary loaded;
- Pre-built and customizable store.
Installation of PWAjet on your store is as easy as with an add-on. And our specialists customize it for your store. It takes up to 3 working days.
Next time, we’ll unveil more secrets about the PWA technology, and share features of PWAjet helping digital entrepreneurs dominate the market the next five years.
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