How E-commerce App Can Increase Customer Lifetime Value

How E-commerce App Can Increase Customer Lifetime Value

Date: April 05, 2024

CLV is a powerful business metric that you need to make the most of!

There are a number of metrics to judge and analyze an e-commerce business. You can look into bounce rates, conversion rates, and CTRs to gauge the performance of your business. But the most important of them all is the customer’s LTV or the Lifetime value.

What is LTV of an App User and Why Does it Matter?

User lifetime value (LTV) is the average value of a user or a customer over the lifecycle of an app. It is an important metric and can have multiple forms. You can share the app on platforms where your prospects are hanging out or recommending your app to friends and relatives.

It could also be revenue for in-app ads and purchases. For example, if a customer does not spend money using the app but shares it with others who do use it and spend money, he is valuable.

It is necessary to understand the LTV of your end-users. This helps you to successfully measure the return on investment (ROI) of a marketing campaign. For marketers, it is not wise to just focus on new user acquisition. It costs six or even seven times more to acquire a new customer than to retain a current one.

Also, the probability of selling to a new prospect is 5 to 20 percent as compared to 60 to 70 percent of an existing customer. Hence, marketers need to concentrate on creating strategies to gain customer retention and convince them to continue purchasing their commodities or services.

For this, they have to pay attention to the user’s actions within the app. They need to improve the user experience which will result in more revenue generation.

Calculating the Lifetime Value of Customers

There are multiple ways to calculate this important metric. The three vital stats you need are as follows:

  1. Average order value 

  2. Average purchases per week (month or year)

  3. Value per week (month or year)

You need to take a handful of customers, determine their spending on orders and average over a set amount of time. Then multiply these together to get their average spending for that amount of time.

From there, you only need to plug in these numbers into the equations provided below:

Different ways to calculate LTV

Can an App Increase a Customer’s Lifetime Value?

There are various factors responsible for customers’ lifetime value, and a mobile app is one of them. To yield a high return on investment (ROI) of your marketing campaigns, you need to increase the lifetime value of users.

This can be done by boosting app usage. Several methods have been known to increase the LTV of customers. In this post, we will cover the methods that will bring success to your e-commerce business.

1. Mobile Deep Linking

Deep linking is the process of using a URL to link to a specific page or location within a mobile app. It directs users to the relevant content in a variety of ways, including notifications, SMS, email, and social media. It also allows users to reach their objectives much quicker.

For instance, consider a user looking for a particular type of restaurant or hotel in some area. They will be directed through a deeply linked ad within the app. The search will take the user directly to the intended result, via the app, even if it isn’t installed.

Deep linking gives users the ability to witness the effectiveness of an app before it is even installed. This greatly increases the probability that your app will be installed and can improve the lifetime value of a user.

2. Optimize Your Onboarding Process

The onboarding experience has to be enticing and sticky when you are trying to acquire new users and hoping to create a long-term engagement. You need to personalize the experience for the users and provide them with what they need.

Customers with useless information can be ineffective for your app and e-commerce business. Optimizing users’ onboarding process requires extensive research and testing. This is where A/B testing can be quite useful.

You will need to test different flows and see which ones appeal the most to your users. To increase customer retention, you must impress them at the start and continue to do so throughout their usage.

3. Push Notifications

Push Notifications can be quite effective to engage your users. If you can get users to allow push notifications, you have a greater opportunity to leverage notifications. This will help you to increase in-app interactions and engage with inactive users.

However, push notifications must be used smartly. While push notifications can enhance user experience but being too intrusive with them can do the exact opposite, i.e., deter users from using the app.

We analyzed a recent study of more than 200 apps by urbanairship. It revealed that 30 percent of Android users didn’t receive any push notifications in the 90 days after they first opened the app. Among them, only 5 percent continued to use the app after their first opening. This indicates a loss of the chunk of money you are spending on acquiring them.

It is equally important to ensure your push notifications are personalized in order to increase engagement rates. Study your metrics thoroughly to determine which type of notifications work best for a particular user.

Don’t forget that the timing and size of the message are important. Keep the message short and experiment with A/B testing to determine the best timing.

Push Notifications

4. Make Customer-centered Decisions

In order to achieve high lifetime value, you need to make customer-centered decisions throughout the product lifecycle. Make sure you understand the users’ requirements and desires and develop an app that serves their needs.

Offer support on channels where your prospects are hanging out. This includes social media platforms such as Facebook, YouTube, and Twitter. Moreover, integrating an in-app support tool is also an effective way to boost engagement and user retention.

5. Improve UI

Your mobile app UI design is also a key element in user engagement. If your app makes it tough for users to access certain features, they will get frustrated and as a result, leave the app. Use analytics to understand friction points and try to create a seamless and engaging experience. This will improve your app usage while increasing session length as well.

No matter which tactic you use to enhance a user’s lifetime value, in the end, it is user satisfaction that matters the most. By maximizing user satisfaction, you can be sure of an increased customer LTV.

6. Mobile Advertising

Integrating your user acquisition (UA) strategy with user retention is an effective way to increase LTV of current and potential app users. Don’t forget to analyze and optimize your UA strategy with mobile advertising.

You can launch boost campaigns for your e-commerce business via mobile apps to increase app downloads and maximize LTV of your customers. It also reduces the total cost for customer acquisition and hence maximizes your revenue. It is critical to research and test for some time to get an idea of where you need to spend your campaign budget.

7. Be Accessible When Your User Needs

An important way to boost user engagement and increase their lifetime value is being accessible to them. You need to keep in touch with them on various platforms and encourage them to provide feedback on your commodities and services.

Social media is a great place to communicate with existing and potential customers and grow their confidence in your brand. Don’t forget to use these channels with real-time strategy, because your response time matters on social platforms. These platforms also provide numerous ways to spread the word about your app and increase your customer base.

The Bottom Line

E-commerce businesses need to develop an app that focuses on user engagement and retention. While user acquisition is important, it isn’t a cost-effective way to maximize revenue. A mobile app can be an effective tool to bring value to your e-commerce business. Make sure you use the tactics listed above to increase the LTV of your customers.

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Arpit Dubey

By Arpit Dubey LinkedIn Icon

Arpit is a dreamer, wanderer, and a tech nerd who loves to jot down tech musings and updates. With a logician mind, he is always chasing sunrises and tech advancements while secretly preparing for the robot uprising.

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