Top 10 Tactics to Increase Customer Lifetime Value (CLV) Using Email Marketing
How much time and money does your email marketing team invest in trying to reconnect with customers who have seemingly gone silent? In doing so, you might miss your focus to increase customer lifetime value by not engaging with loyal customers who contribute more significantly to your revenue.
Naturally, you can’t ignore customers who might be on the cusp of churning or who have already disengaged. But your most valuable clients deserve – and are coming to expect – lots of love from you as well.
As you gear up for the coming holiday season, what are your plans for appealing to your highest-value customer segments? I’ve created this guide to help you navigate the steps to take to build a business case and strategic plan for reaching the most profit-generating segment of your customer base.
In this blog, I’ll discuss why viewing your email program from a customer-value perspective can aid in retaining high-value customers. Additionally, I’ll provide practical advice for shifting your team’s mindset to improve your brand’s results. We’ll also implement this advice by exploring ten exciting ways to leverage email to increase customer lifetime value. Furthermore, I’ll share email examples from prominent brands such as Frontier Airlines, Ooma, Molton Brown, and Charlotte Tilbury.
Ready! Let’s get started!
Understanding MVCs (Most Valuable Customers)
Let’s look first at why you should take time to focus on them. You’ll need this information to support budget requests for more time and money to develop marketing strategies and email programs that target your MVCs without burning them out.
Customers are more marketing-savvy. The market has changed over the last few years, first because of the COVID-19 pandemic and then because of inflation-driven wobbles in economies worldwide.
Customers expect more from brands and easily switch loyalty for better deals and more rewarding experiences elsewhere.
That’s not to say they’ll chuck you out for a 20% higher discount here and there. Loyal customers expect rewards, discounts, and unique treatments as tangible demonstrations of your appreciation for their loyalty.
Not all customers deliver the same value. This isn’t as obvious as it sounds. Many loyalty programs reward customers on how often they buy, not how much they spend. We need to keep customers buying, of course. But are these frequent buyers also your best revenue-generating customers? Not always.
Look at the chart below, which shows five different customer types. The customers to target for special treatment are the ones in the bottom row of the graphic: those who buy only once a year but whose order values are in the highest 10% of all your customers, plus the active customers who also talk up your brand in reviews and on social media. If you measure or reward loyalty only on frequency, you could overlook these high-value customers.
It’s likely too late to start or enhance a loyalty program with the holiday shopping season already in progress. But you can harness the power of a mature revenue-generating channel such as email to work differently to reach your highest-value customers more effectively.
High-value customers want to buy from you. That often gets lost in these conversations. These represent the low-hanging fruit in your database. These customers are likely to secure quick wins now and pave the way for your success in the upcoming year.
The key to reaching out to this highly engaged segment is to understand their motivations, needs, and goals. Help them convert, not just to benefit your brand but to see how they benefit too. Help them achieve ‘their’ objectives.
Your relationship with your customers is like a coin. It has two sides. Your KPIs, goals, and objectives are on one side. Their needs, expectations, and objectives are on the other. You need a marketing strategy that includes both sides of the coin. Keep reading to discover how email can help you accomplish that.
Remember the Pareto Principle. It holds that 20% of your customer database is responsible for 80% of your revenue. Yet we spend more time chasing the people who lapsed, are on the verge of lapsing, or have gone dormant.
It’s easy to understand why. We’ve likely spent precious budget resources to acquire them, they must have been interested enough at one time to sign up for our emails, and they might even have purchased once or twice. This is a major con of following acquisition-only models.
Retention marketing – unsexy but essential. Retaining your high-value customers and increasing their value is more important than ever, especially as customers are more willing to change brands. Here’s why this segment is so important:
- It’s where your current revenue is
- It’s where you’ll find the lowest-hanging fruit for additional revenue
- Your biggest advocates are in this segment
- The zero- and first-party data you need, is here
- It’s the biggest source of prospective customers for your competitors too
I highlighted that last point because your competitors might have already figured this out and are training their sights on your MVC right now.
The numbers line up, too. Bain and Company found increasing customer retention rates by 5% increases profits by 75%. Further, an average 65% of a company’s business comes from repeat customers, and 82% of companies agreed that retention is cheaper than acquisition.
Mini case study: Adidas adiClub: An Investor Relations report for Adidas, the athletic footwear and apparel manufacturer, says members of its adiClub loyalty program buy 50% more often than non-members, and their customer lifetime value is twice as much as non-members. That sums up everything I’ve been saying about why engaging your highest-value customers makes excellent business sense.
Customer Lifetime Value (CLTV) can identify high-value segments
The Adidas case study mentions Customer Lifetime Value, a business metric marketers should use to identify the people who make up this key segment.
CLTV can uncover revenue-generating customers who get overlooked by conventional metrics such as frequency or website activity. Remember, these are the loyal or VIP customers I mentioned earlier.
To calculate CLTV, multiply a customer’s average annual spend by their years as an active customer. You can also use this metric to compute the value of an email address.
This metric also illustrates why you should rely on more than general averages for measuring Customer Lifetime Value. Try comparing Customer Lifetime Values for your customer group in general and then your loyalty members, and you’ll quickly see why marketing to that segment makes better business sense.
Five questions that will help you find your best customers
Here’s where the process gets interesting. You’re going to dive deep into your data and ask questions that come up with insights you can use to understand your high-value customers better and to serve them more effectively. Don’t stop researching until you can answer all five:
- What characteristics do these customers have in common?
- Which characteristics can you use to increase their number, make them feel appreciated, encourage them to increase their average order value and become brand advocates?
- How did you acquire these customers?
- Which campaigns drive them to act?
- What do they buy most often, and do they buy at full price or with discounts?
After you complete your research, schedule a brainstorming session where you can talk through the findings, what they mean, and how these insights could change your marketing approach.
Then, unleash your team to develop creative ideas for working with these high-value customers.
Don’t worry about coming up with polished ideas at this session. Encourage people to riff on the ideas and insights you gathered from those five questions I listed above. Set up whiteboards or giant pads of drawing paper or poster board, and let people fill them up with their ideas.
10 Tactics to Reach Your Most Valuable Customers and Increase Customer Lifetime Value with Email
1. Cross-sell and upsell with personalised recommendations
This is tried and true as a revenue builder for most brands and strategies, but you’ll take it up a notch if you use predictive modeling to choose items to feature in the emailer, such as products related to past purchases. If you still need to but don’t have the technical architecture to predict and personalise, a good first step—is simply to include best-selling products.
2. Enhance the customer experience with Helpful Email Marketing
Every email you send can be a customer-service email. Today’s consumers don’t want you just to sell to them. They want you to help them achieve their objectives. When you transition to Helpful Email Marketing, you look at your database differently. Instead of saying, “What can we sell them today?” you ask, “What can we do to help them?”
The email below is from Frontier, a regional U.S. airline. It recaps the itinerary and then adds a checklist to help passengers get ready with baggage checks and seat assignments, travel insurance, car rentals, and hotel reservations.
It’s highly personalized, right down to checkmarks that indicate what the passenger has done and not done. Yes, it’s designed to sell these add-on services, but for many passengers, they meet needs, too.
3. Identify high-value customers and treat them differently
Feeling esteemed is one of the highest human needs, according to Maslow’s Hierarchy of Needs. Recognizing customers for their value is one way to show them that esteem.
The Ooma email below lets customers know exactly why they’ve been chosen to receive an exclusive offer. If you don’t have a formal loyalty program, you can do what this company did – pull out their most loyal customers and show them how they are getting special treatment.
4. Implement a learning relationship
This happens behind the scenes as you help transition your team’s mindset from simply selling to focusing on customer service and customer value. Get to know your customers through your data by asking the five questions I posted above.
As marketers you have to own this. Nobody knows your customers and products better than you do. The insights you discover as you sift through your data can build customer knowledge and guide decisions beyond the marketing department.
This learning relationship gets smarter with every interaction. It builds a context of its own that becomes richer and deeper as time goes on.
5. Work to increase trust and loyalty
This trust can repay your efforts with higher-order values as customers come to rely on both your products and your expertise. It’s a key component in the success of Helpful Email Marketing.
It also taps into the customer experience. Email is the channel that often kicks off the customer experience because we’re directing them to our websites and social media channels. Make sure you understand what the customer is experiencing. It should be both positive and transparent.
Transparency starts at opt-in, where you are clear about what customers are signing up for and what they can expect from your emails. Even something as ordinary as sending an “Oops” email when something goes wrong can build trust and loyalty when you own up to the mistake and explain how you will make it up to the customer.
The DMA (UK)’s 2023 Consumer Email Tracker found customers have, on average, 10 trusted brands that they do business with. Transparency can help build that trust and move your brand into that trusted inner circle (or keep it there).
6. Use discounts strategically to promote loyalty and spending
Discounts eat into your profit margin, but they’re also a fact of modern marketing life. A Statista report found that 72% of customers said the main benefit of a loyalty program is getting discounts, while 70% said it was getting rewards.
You can find other ways to reward customers, but understand, too, that customers are transactional in their loyalties today. What’s in it for them? Discounts and rewards are the prime drivers, but you can package a basic offer, such as a 20% discount, as a birthday greeting or random “just because” incentive. Or build email campaigns around tactics such as bundling products for a special price and using flash sales to clear out hard-to-move items.
7. Set up a wishlist program
Did you know 40% of shoppers think their shopping experience would be better if retailers offered a wishlist where they can save items they’re interested in? Amazon is one major retailer that has raised the wishlist game to a high level. Customers can create wishlists for themselves, for friends and family, and for charitable organizations that use these wishes for easy fundraising.
A wishlist program is another avenue for Helpful Email Marketing as well. You can build an email campaign to promote the benefits of creating a wishlist, show customers how to set up one and suggest products they could add to those wishlists, as Molton Brown does in the email below.
You can send another email when an item on the wishlist goes on sale or is low in stock. When you’ve helped them save money, or you’ve helped them avoid disappointment. This can be all the nudge a customer needs to purchase from the list.
8. Create a replenishment program
If you sell consumable products (food, baby products, health and beauty, household products, beverages and the like), set up a program that triggers an automated email near the end of the product’s likely buying cycle, and include personalized information to remind customers what they bought.
A replenishment program can use overt (obvious) personalisation or covert (hidden) personalization. It can either call the customer by name and remind her it’s time to reorder, as the Graze Shop does in the email below, or it can simply add the purchased product into an assortment of recommended items. That serendipity of relevant content can also nudge the customer into action.
Inbox benefit: Replenishment emails could bolster your sender reputation as well because they generate more of the activities mailbox providers want to see from email senders. According to Ometria, they have an average 50%-60% open rate, an average click rate of 40% to 50%, and an average conversion rate of 10% to 15%.
9. Add free shipping
And highlight it in your email campaigns. With shipping costs going up steadily, customers are even more reluctant to buy when they encounter an added expense at checkout. And free shipping (or building the shipping cost into the product price) really does matter.
Shopify found people spend more than $22 extra on their median orders with free shipping than when shipping is added separately. Also, customers order an average 2.5 items with free shipping, compared to fewer than 2 items without it. Featuring the free shipping incentive prominently in every email is essential. (see the Lume email campaign below.)
Granted, you can’t always do this if you have to ship overseas or have other unique conditions that make shipping costs vary widely. But if your data shows you can increase Customer Lifetime Value with free shipping, you should research and present the business case to create it.
10. Launch a loyalty program
This will be a big project. It has implications all through your organization, so it’s a business decision, not just a marketing decision. You will need to do your research thoroughly to build your case for it, but you can use this guide as a blueprint to ask the right questions, dig into your data, and find the rationales to support your request.
Email should be a major component for launching and promoting your loyalty program. In an email, you can get the space that you might lack in social media posts to explain details of the loyalty program, how it works and how members will benefit by joining, and even keep members updated on their status and the perks available to them.
Final thoughts
There’s a lot to take in here when coming up with ideas for using email to reach out to your most valuable customers and to increase customer lifetime value. Many of my suggestions can be scaled down to launch fairly quickly after A/B testing for effectiveness. But don’t despair if you can’t launch any or all of them before the holidays. Having an email strategy that focuses on high-value customers is a goal that can last all year long.
Not sure where to start? Begin with your data; discover all you can about this segment of loyal customers and what makes them different from the others in your database.
To learn more valuable insights around the subject, watch Netcore’s Masterclass – Hacking Growth this Holiday Season, now available ON DEMAND!
And there you are – you just took the first step to help make email even more valuable in helping your company accomplish its goals!