There are few metrics more important than your Customer Lifetime Value (CLV).
CLV isn’t just about the next conversion or social share. It teaches you to look at the relationship with your audience as a long-term strategy.
When you’re focused on CLV, you’re focused on building a loyal audience and catering to their needs.
Obviously, you want your CLV to be the best it can be. But how do you do that?
There are hundreds (if not thousands) of strategies for increasing CLV, but not all of them are created equal.
And more importantly, not every CLV optimization strategy will work for your brand.
That said, there are some strategies that will work for pretty much every brand out there. And since we’re big fans of email marketing here at Drip, today I’ll show you how to increase your CLV with email marketing.
Email marketing is one of the best ways to get a ton of detailed information about your customers.
You can figure out what they like and dislike, and over time, get better at understanding who your audience is and what they want.
Because your email list is such a rich source of data, you can also utilize it to improve your CLV both in the short and long term.
Ready? Let’s get started.
Table of Contents
2. Focus Equally on Acquisition, Optimization, and Retention
1. Start With Segmentation
Right off the bat, you can segment your email list by current CLVs.
Even though your CLVs will change (hopefully for the better), segmenting by CLV right now gives you a bird’s eye view of where you are.
It also allows you to focus on segments with lower CLVs. In effect, you’re creating a spectrum, from mostly inactive subscribers to loyal repeat customers.
The goal here isn’t to just focus on the customers who are buying from you. You have to look holistically at the entire range of CLVs across your entire email list.
If you’re like most brands, you’ll find that there are usually two smaller groups of subscribers: the very unprofitable and the very profitable. The biggest group is usually made up of profitable subscribers.
That’s what a typical CLV curve will look like.
You can use this three-group curve as a guideline and segment your email list into three distinct parts.
However, you can also get more precise with it. For example, you can create more than three groups to laser focus on small portions of your audience.
You can even segment your segments by CLV. I know that sounds confusing, but bear with me.
This technique allows you to create main segments based on another metric and then create groups from that segment.
Let’s see how this would play out in a real-world scenario.
Say you have a site that appeals to a wide range of people, maybe a food site. You could segment your list by category, so you’d have segments like health nuts, parents, and culinary enthusiasts.
You could take each interest group and then further segment it by CLV. This is a hyper-targeted approach to CLV segmentation, and it gives you a super detailed look at what’s going on.
You can get as specific as you want, or you can create larger groups. It’s completely up to you.
No matter how you go about it, there’s no doubt that segmenting your email list like this will give you a solid foundation for increasing your CLV.
For more on how to calculate customer lifetime value, read this blog post from Kissmetrics.
2. Focus Equally on Acquisition, Optimization, and Retention
In terms of increasing CLV, you should have three main goals.
To understand these three goals, let’s revisit the idea of three main groups: the unprofitable, profitable, and very profitable.
- Goal #1 should be to get new customers on your list with the aim of moving every subscriber from the unprofitable group into one of the profitable ones. In other words, you want to acquire new subscribers.
- Goal #2 should be to keep the profitable and very profitable groups stable. You probably recognize this concept as retention.
- Goal #3 should be to move customers from the unprofitable group into the profitable group. (You can also focus on moving customers from the profitable group to the very profitable group.)
These three goals are equally important. Lots of marketers tend to focus on just one or two of these three, and as a result, their whole email marketing strategy (and CLV) suffers.
In simple terms, you need to focus on customer acquisition and optimization/retention.
Source: Paxton Projects
Goal #1 is all about acquisition, while Goals #2 and #3 fall squarely into the categories of optimization and retention.
To be clear, optimization and retention can (and often should) happen at the same time. The better you make the customer experience, the more people will stay loyal to your brand.
So first, let’s talk acquisition.
It might seem a little strange to say that acquisition can increase your CLV. After all, aren’t the optimization and retention stages where the CLV enhancement happens?
Well, that’s what a lot of marketers think, and it’s really just a good way to shoot yourself in the foot.
I’m talking about having the right kind of acquisition. If your acquisition strategies aren’t optimal, you’ll build your entire email list on a shaky foundation.
That’s just one of the many reasons why having a rock solid onboarding strategy can help increase your CLV.
Focus on the welcome email for a minute. Your welcome email (or series of emails) is a new subscriber’s first impression of what it’s like to be on your list.
If you hit it out of the park like Michaels, you’ll impress your new signups and start a fantastic brand-customer relationship.
But if your welcome email doesn’t wow, you’ll probably experience a lower overall CLV.
It makes sense—first impressions matter. How you view a brand on day one can affect how much you spend on that brand.
There’s a lot more to the simple welcome email than you think.
According to Experian, welcome emails have transaction rates that are nine times higher than mass emails.
If you put a little effort into crafting the perfect welcome email, you can reap the rewards. (Oh, and the right onboarding email(s) can decrease churn as well, as this case study proves.)
Now onto optimization.
When it comes to optimizing email marketing, it’s all about sending the right message to the right people at the right time.
You’ve probably heard me say that before, and it’s truer today than ever before. If you want to cut through all of the noise, you have to stand out.
Think about it: your average customer might get anywhere from 10 to 100 emails a day. No matter where on that spectrum you are, you need to give your subscribers reasons to open your emails (and stay on your list).
Sometimes, that means improving your subject lines.
Other times, it means re-segmenting your list to keep it up to date.
Email optimization is a field of study all its own. The best way to optimize is to find what works for you.
Yes, it takes a lot of trial and error, but when you finally discover the perfect email marketing formula for your brand, it’ll be smooth sailing.
Once you’ve found what works, you can’t just quit, and that’s where retention comes into play.
Someone who’s been on your list for months needs to be just as engaged as the person who just signed up. If you put all your focus and energy into acquisition, you’ll experience a high amount of churn.
Retention isn’t just keeping customers around by whatever means necessary. Retention is the practice of keeping the user experience awesome throughout a customer’s time with your brand.
This is one of the big “secrets” of increasing CLV. Even though keeping your customers happy is something everyone tries to do, few marketers actually follow through with satisfying every kind of customer on their lists.
Retention is a long-term strategy, and you need to be prepared for it. It requires a multifaceted approach that looks at the relationship between you and your customers.
Don’t forget that acquisition, optimization, and retention are all pieces of the puzzle here. So don’t get so caught up in impressing new subscribers that you fail to please old ones.
3. Get Specific (and Personal) With Your Campaigns
You’ve probably heard that personalization is all the rage in email marketing, but I’ll get to that in a moment.
First, I want to talk about the power of specific campaigns.
Picture a typical product launch. Along with every launch comes a series of emails promoting the product, and these usually convert pretty well.
These emails have one distinct purpose: to share the news about the product.
Now imagine taking that kind of thought-out purpose and applying that to every email campaign you send. Ever.
Yes, it can be done, and yes, it works just as well as you think.
Some emails seem to have no purpose.
Sometimes, the worst emails aren’t bad, just boring.
An email can tick all the boxes and seem great in theory but fail miserably once it’s out in the real world.
To battle this, you need to make sure every email you send has a specific purpose.
Your emails don’t have to be revolutionary. They just need to do something.
There are lots of reasons why you might send out an email.
Maybe you’re having a fire sale. Maybe you want to send an update on how your app is coming along.
As long as there is a point, your emails will be strong.
However, you don’t always need a big occasion to send an email. Sometimes, keeping the customer connected to your brand is the whole point.
This email from Birchbox demonstrates that concept beautifully:
Source: DAC Group
The email is nothing more than a way of saying, “Hey, we haven’t forgotten about you!” It reminds the subscriber that you’re not just some faceless corporate brand.
Emails like this may seem pointless in comparison to product launch emails or welcome emails, but they’re just as important. Don’t overlook the small emails in favor of the big ones, even though it’s tempting to do so.
Whether the email has a big purpose or a small one doesn’t matter. It’s all about having a purpose in the first place.
If you send an email that doesn’t have any purpose (other than to expose your brand to your list and hope some of them convert), then that email probably won’t perform so well.
When you do email marketing for email marketing’s sake, your customers can smell it from a mile away. So don’t offend them by sending pointless emails.
Before you send any email, you need to ask yourself, “What’s the point?” If you can’t answer that question in one sentence, think twice about sending the email.
This requires you to be honest with yourself, and you’ll find that a lot of your emails have no point at all. That can kill your CLV and stop your progress dead in its tracks.
But if you follow through with this, your emails will be a heck of a lot better, and you’ll see your CLV go up, up, and away.
CLV shouldn’t be some mysterious metric that you bring up once or twice every quarter.
Rather, it should build a foundation for everything you do.
That sounds dramatic, but it’s true.
You want customers to stick with you for as long as possible, and you want to be as profitable as possible.
In many ways, CLV is the single most important metric you can focus on.
It represents the relationship you have with your customers. And even though I’ve focused on email in this article, you should apply these ideas across the board.
At the end of the day, your brand isn’t about you—it’s about your customers. If you worry less about making a quick buck and more about strengthening your relationship with customers, you’ll see tons of improvement in no time.