6 Proven Strategies to Boost Ecommerce LTV for Small Brands

Understanding your customers is key to long-term success, and one way to gain insight is by measuring lifetime value (LTV). This metric tells you the financial value of all customers over the course of their relationship with your business.

It’s essential to monitor LTV, even if your ecommerce business is brand new and you only have a few customers. Why? A low LTV warns you that customer satisfaction needs improvement, while a high LTV indicates positive customer satisfaction and a higher chance that customers convert.

Keep reading to dive into the importance of ecommerce LTV, strategies to improve it and your landing page conversion rates, and ways to track and analyze LTV over time.

What is ecommerce LTV?

LTV predicts the combined revenue you’ll gain from all customer relationships. You can calculate LTV with the following equation:

LTV = (Average Purchase Value x Average Purchase Frequency Rate) x Average Customer Lifespan

For example, let’s say your average purchase value is $1,500, the average purchase frequency rate is 20, and the average amount of time your customers have been with your business is two years. You would calculate the LTV as:

LTV = ($1,500 x 20) x 2 years = $60,000

As you can see, this requires you to calculate a few other metrics first: average purchase value, average purchase frequency rate, and average customer lifespan. Additionally, calculating customer acquisition cost (CAC) helps you assess the effectiveness of your sales and marketing strategies—including your landing page strategies.

Average Purchase Value = Total Revenue / Number of Purchases

Average Purchase Frequency Rate = Number of Purchases / Number of Customers

Average Customer Lifespan = Sum of Customer Lifespans / Number of Customers

CAC = (Cost of Sales + Cost of Marketing) / New Customers Acquired

Why LTV is key for ecommerce success

Improving your ecommerce LTV is beneficial in multiple ways that impact your bottom line. Many of these benefits are directly related to amplifying your customer experience as well, including:

1. Gaining a better understanding of your customers

LTV helps you identify which types of customers are most valuable to your business. This informs your ideal customer profile and allows you to personalize your ecommerce strategy to attract and retain more of these customers.

For example, your analysis may show that customers who purchase a certain product have a higher LTV. With this in mind, you can craft strategies that involve upselling or cross-selling that product, as well as promote it more heavily through your marketing and sales efforts.

2. Improving customer loyalty and retention

Higher ecommerce LTV can lead to more sustainable business growth. High-value, loyal customers contribute more revenue over the length of their relationship with your business. By focusing on retention and loyalty, you can maximize a customer’s value over time.

3. Increasing profits and reducing acquisition costs

Analyzing LTV and identifying high-value customers to focus on allows you to craft cost-effective retention strategies. This ranges from email marketing campaigns to landing pages targeted toward existing customers. 

According to First Page Sage, the average ecommerce CAC is $86—and an LTV of at least three times this is ideal. By focusing on retaining customers and encouraging repeat purchases, you reduce these acquisition costs while increasing your LTV and profit.

4. Revealing product improvement opportunities

Analyzing LTV gives you a better understanding of what value your customers get from your products. Look at what products your high-value customers purchase most, then gather feedback and data to understand how these products benefit them and what pain points they address.

You should also identify low-value customers and ask them for feedback on how your products could improve.

5. Boosting conversion rates

Moving the needle toward better ecommerce LTV also benefits your customer conversion rates. Putting more effort into improving customer satisfaction and LTV at all stages of the buyer’s journey, including the awareness stage, increases the chances that potential customers convert. 

Higher conversion rates lead to increased profits, which means you can reinvest in further A/B testing and conversion rate optimization (CRO), as well as other improvements.

How to increase your ecommerce LTV

Increasing ecommerce LTV involves a combination of strategies that focus on improving customer experience and maximizing the value customers gain from each interaction with your brand. Here are some tactics for improving your LTV:

Tactic 1: Use data to create targeted strategies

SplitBase used data to better understand BestSelf Co.’s customer base and A/B tested two variations of a product page headline. (BestSelf Co. on SplitBase)

Analyzing customer data, like demographics and survey responses, reveals customer needs, preferences, and pain points. This allows you to develop targeted strategies to address those needs and match preferences.

Here’s how you can use customer data to identify opportunities to increase ecommerce LTV:

  • Segmentation: Divide your customer base into groups based on shared characteristics, such as purchasing habits, product preferences, and demographic information. This allows you to tailor your messaging to specific needs and pain points.
  • Predictive analysis: Use historical data to predict future customer behavior. For example, identify customers who are at risk of churning, then develop targeted strategies to improve their experience satisfaction.
  • Customer journey map: Map your customer journey from the awareness stage to repeat purchases in order to identify opportunities to improve customer experience. This also helps you create landing pages tailored to each stage of the buying journey to resolve all customer concerns and objections.

Remember, while quantitative data is often our first go-to, you shouldn’t overlook qualitative data since it provides critical context.

Tactic 2: Leverage personalization

SplitBase used qualitative research to discover that Roots of Fight’s customers shopped with a clear idea of what they wanted to buy, leading to an improved site design. (Roots of Fight on SplitBase)

Tailoring your online experiences to customer preferences increases customer satisfaction and the likelihood of repeat purchases—and also results in improved ecommerce LTV. Customers are 56% more likely to buy from a brand again after receiving a personalized shopping experience. 

Some common ecommerce personalization strategies include:

  • Product recommendations: Browsing history and past purchase data are helpful for personalizing product recommendations and helping customers discover related products they may be interested in.
  • Personalized emails: Segmentation allows you to send personalized emails based on customer behavior. For example, you could send an email with related product recommendations to customers who recently made a purchase.
  • Tailored content: You can also personalize the content your customers see on your website. For example, you can create high-converting landing pages by analyzing customer data and feedback.

Personalization makes your customers feel understood and valued, and skipping it can have negative consequences. McKinsey found that 76% of customers get frustrated when businesses don’t personalize interactions—and this risks losing customers altogether.

Tactic 3: Implement a customer loyalty program

Customer loyalty programs can significantly impact your ecommerce LTV. A 2022 McKinsey report states that three out of four loyalty program members changed their behavior and generated more value for the business. 

Additionally, McKinsey found that 64% of members are more likely to make frequent repeat purchases, 50% are more likely to share brand referrals, and 35% are more likely to stay loyal to the brand.

These clear benefits offer compelling reasons to develop a successful loyalty program. Some examples of top-performing programs include:

  • Starbucks Rewards: With almost 29 million active members, the Starbucks Rewards program features a points-based system where customers earn stars for every dollar spent. They can later redeem these stars for free drinks and food. The program also includes birthday rewards.
  • Amazon Prime: Though it’s under fire for the recent addition of ads to its streaming service, Amazon Prime is still a popular loyalty program with more than 200 million global members. The program charges a monthly fee in exchange for free shipping, video and music streaming, and shopping events, all of which encourage repeat purchases.
  • Sephora Beauty Insider: Beauty brand Sephora’s loyalty program currently has more than 34 million members who earn points for every dollar they spend. Spending more allows customers to move up to the next reward tier and gain access to bonuses like savings events, birthday gifts, and exclusive beauty events.

Common ways to encourage loyalty program participation include gamification, personalized content, and tiered membership levels. 

Gamification can include punch cards, spin-to-win activities, challenges, and rewards milestones.

Personalized content involves rewards tailored to specific customer preferences, specialty events (like Amazon Prime Day), and exclusive product release invites.

Tiered membership levels are a great way to offer additional rewards to your most valuable customers. For example, Sephora’s loyalty program offers three rewards levels. The first tier, Insider, is free to join, the VIB tier requires customers to spend at least $350 per year, and the Rouge tier requires them to spend at least $1,000 per year.

Tactic 4: Optimize your product offering and pricing strategy

Birthdate Co. offers birthday candle and birthdate book product bundles that boost AOV. (Source: Birthdate Co. on SplitBase)

A strategic product offering and pricing strategy can increase how often customers make purchases, as well as the average order value (AOV), which increases your customer LTV in turn.

Here are some examples of successful product and pricing strategies:

  • Bundles: Bundling related products provides value to your customers and increases AOV.
  • Tiered pricing: Pairing tiered pricing with bundling lets customers bulk order products they’ll need to repurchase. For example, Dr. Squatch offers discounts to customers who order 4, 6, or 10 bars of its soap at a time.
  • Return policies and guarantees: SplitBase found that a common issue preventing beauty brand customers from purchasing was a lack of a guarantee that the products would work for them—and a lack of policies to lessen their worries. Ensure that your policies encourage purchases rather than prevent them.

Use data to determine the best pricing and product strategy and ensure that it makes sense for your customers.

Tactic 5: Encourage customer feedback and engagement

Using in-depth customer research, SplitBase A/B tested landing page variations to improve Dr. Squatch’s LTV and customer experience. (Dr. Squatch on SplitBase)

Feedback adds valuable insights about what your customers like or dislike about your brand and products. Additionally, it builds relationships that improve customer satisfaction.

Here’s how you can encourage and use customer feedback to improve your LTV:

  • Identify improvement areas: There’s value in both negative and positive feedback, as both can show you which products and features certain customer segments like or dislike. These preferences can uncover areas for improvement or new strategies.
  • Respond to build trust: Responding to feedback shows customers that you value their opinions and are committed to improving their experience. Thank customers for sharing feedback—whether it’s positive or negative.
  • Make it easy to share feedback: You can encourage customers to share feedback by providing multiple channels for them to contact you, such as email, social media, or even short surveys on your website. The easier it is for them to share feedback, the more likely they are to do so.

Actively asking for feedback is a good strategy to gather a variety of opinions that customers might not share on their own. 

Tactic 6: Focus on high-quality content marketing

SplitBase worked with Laura Geller to improve its landing page conversion rate by educating customers on the beauty brand’s products. (Laura Geller on SplitBase)

Providing valuable and engaging content builds customer relationships and education, resulting in improved trust, loyalty, and engagement.

Some content marketing strategies you can use to improve ecommerce LTV include:

  • Educational blog posts: Blog posts that teach about your products and industry provide value to your customers. Additionally, these posts can position your brand as an expert in your field—and optimizing them for search drives organic traffic to your website.
  • How-to guides: You can improve product adoption by showing customers how to effectively use your products. This reduces friction and helps them quickly gain value from your brand, improving satisfaction and your overall customer experience.
  • Email newsletters: Your email marketing campaign is a prime opportunity to add value to your brand’s relationship with your customers. For example, you can share tips, industry updates, and insider information related to your products. 

Focus your content marketing strategy on high-quality content creation. Don’t create content just to publish it—ensure that each piece is informative, engaging, and valuable to your target audience.

How to develop a strategy for increasing ecommerce LTV

Developing a strategy to increase your LTV requires careful planning and testing and continuous monitoring. Start with these steps to create an effective LTV improvement strategy:

1. Define your ecommerce LTV goals

Clarify what you want to achieve in terms of LTV and the metrics that increase it. For example, you might choose to boost your customer retention rate or increase the number of repeat purchases.

2. Collect and analyze data

Assessing data from tools like Google Analytics and heatmaps helps you understand how to craft interactions that resonate with your target audience. Use this data to identify patterns and trends that indicate what your customers want and need.

You can also survey customers to gather qualitative data. This feedback provides you with the context you need to fully understand why your customers take the actions they do.

3. Prioritize tactics

Not every strategy makes sense for every brand. Consider your specific business goals, as well as customer needs and how your ecommerce LTV strategy can support them.

4. Create a clear plan

Once you’ve chosen the tactics that make up your strategy, it’s time to develop a clear implementation plan. List specific steps, timelines, and resources you require, as well as the stakeholders who are involved and the assignees for each step.

5. Align your tactics

All parts of your chosen ecommerce LTV strategy need to work together to achieve your goals. Each tactic should reinforce the others and should not operate in isolation. 

For example, using personalization not only allows you to create high-converting landing pages and adapt your messaging strategy, but it can also help you identify loyalty program rewards that resonate with customers and inspire them to sign up for the program.

6. Test and monitor

Based on your data analysis, develop hypotheses for different LTV strategies. A/B test small changes to better understand the impact of each hypothesis. And remember, even failed tests offer insight. Use these test results to optimize your ecommerce LTV strategies. 

Continue to analyze the data, hypothesize new personalization tactics, and test them to stay on top of customer satisfaction and increase LTV.

How to track and analyze ecommerce LTV over time

By tracking LTV from the day your business launches, you can establish a benchmark and monitor trends, both of which help you measure the impact of your strategies on LTV.

To measure LTV, track these key ecommerce metrics:

  • Purchase frequency: An increase in the average number of orders that customers make over time can indicate a successful LTV strategy.
  • AOV: This metric refers to the average amount that customers spend each time they place an order. An increase in AOV likely means that customers find more value in your products, which means they spend more with your brand.
  • Customer retention rate: Retention rate is the percentage of customers who remain with your business over a given period. A higher retention rate can indicate an effective LTV strategy.
  • Customer churn rate: Churn rate measures the percentage of customers who leave your business over a period of time. A lower churn rate suggests that your LTV strategy is working.
  • Net Promoter Score (NPS): This metric measures customer satisfaction and loyalty by surveying your customers. A higher NPS indicates that your LTV strategies are improving your customers’ experience.

Tracking and analyzing your ecommerce LTV isn’t a one-time task—it’s an ongoing process. Continuously monitoring these important metrics provides you with critical data to inform your strategies and effectively improve your LTV.

Partner with SplitBase for LTV optimization

Tracking ecommerce LTV over time is crucial, even if you’re just starting your business or have a small customer base. This is because LTV reveals insights into your customers’ long-term value, which informs your business strategies, sales and marketing efforts, and investment decisions. 

Improving LTV also improves customer conversion rates and profit. This allows you to reinvest in CRO initiatives like product iterations and landing pages, which can then increase your LTV.

Discover how you can effortlessly grow your ecommerce LTV with proven CRO strategies from SplitBase. Build a positive success loop for your business and request your free CRO proposal today.