Improving Customer Lifetime Value Through Customer Service

Gladly Team

Read Time

4 minute read

Once a shopper has made a few purchases from your brand, they have two choices: churn or become a loyal regular. Customer churn leads to an average of $168 billion in lost revenue every year. On the other hand, returning customers who make repeat purchases and refer their friends and family, are one of your greatest business assets.

Nurturing customer relationships through effective customer service increases their lifetime value and generates significant revenue for your brand. By measuring customer lifetime value (CLV), you’ll learn not only how much value your customers provide to you, but also how much value you provide to them.

[Read more: 3 Key Reasons Great Service Drives Higher LTV]

What Is Customer Lifetime Value?

CLV measures a customer’s average spend over the course of their relationship to your brand. It also calculates how each customer influences your revenue.

You could have a small customer base that’s providing significant value, or you could have a large pool of customers who are providing little value. By taking a deeper look at this metric, you will discover opportunities to grow:

  • The average order volume per customer (aka, encouraging customers to spend more per purchase)
  • The number of purchases customers make over time (aka, encouraging customers to make more purchases)
  • Or in the volume of customers making purchases (aka, gaining more customers to make purchases)

The CLV calculation helps your team understand how valuable each customer is to your business, but it also indicates if you are losing customers faster than they can provide value.

Use this customer lifetime value formula to find out:

Customer lifetime value = customer value x average customer lifespan
Note: Customer value = average purchase value x average number of purchases

A Brand That Feels Like a Friend Earns 600% YoY Growth

🛑 Despite selling a product that comes with an emotionally taxing shopping process — swimwear — Andie Swim has kept exceptional customer service at the core of their business, to great effect. To date, they’ve seen 600% YoY growth, while building a robust customer feedback loop. Hear their story in the Andie Swim x Glady podcast episode.

CLV practice example

Let’s look at how you might use this formula. Let’s say your average customer purchases five pieces of clothing from your store at an average value of $35 each, and your average customer lifespan is three years. Your formula would look like this:

(35 x 5) x 3 = $525

This means that on average, your customers are spending $525 on your brand for the duration of their relationship with your brand.

Depending on the size of your business, this may be a great customer lifetime value — especially if you have a high number of customers. However, if you are losing customers and aren’t meeting costs, it’s time to consider what is causing your customers to churn.

The Impact of Customer Lifetime Value on Your Business

You can glean a number of valuable insights from the customer lifetime value formula:

  • Your marketing budget’s ROI
  • If your customers are higher in quality or quantity
  • Average customer spend
  • Your most profitable shopper segments

The real challenge is using these insights to find the tactics that will boost value or increase customer volume. Customers could be entirely satisfied with your service but not spending nearly as much as you hope they will. Or, they may love your product, but are churning due to poor customer service.

It’s up to you and your team to identify the roadblocks keeping your customer lifetime value from growing. However, you’ll find the best way to improve it is through better customer service that nourishes customer loyalty.


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Improving Customer Lifetime Value Through Customer Service

Providing exceptional customer service makes your shoppers feel important, which increases the likelihood they’ll provide value back into your business. By thinking strategically about your customer service, you can increase a customer’s lifetime value to your business while offering more value to them as well.

Increase brand loyalty to drive future spending

To increase your customers’ lifetime value, it’s vital that you provide radically personal customer service. Personalized customer service increases loyalty among shoppers, which can seriously boost your revenue, as 72% of shoppers are willing to spend more with a brand that provides excellent support.

Learn more from Gladly: Brand loyalty doesn’t come easy, but it’s possible to build with the right strategies. The most important one? Developing customer relationships rooted in deep empathy. Learn other ways to make customers love your brand with our helpful guide.

Leverage loyal customers for referrals

Acquiring new customers costs more than keeping loyal ones. Referrals are also the easiest way for your business to reach new potential customers. By offering excellent support, you’ll transform loyal shoppers into promoters, as 59% of customers would recommend a brand to a friend due to customer service.

Learn more from Gladly: Though you can’t measure them, word-of-mouth referrals can support your marketing budget and get more from your customers. Learn several key tactics to boost these referrals.

Upsell to customers who welcome recommendations

CLV increases even further when you leverage opportunities to upsell to loyal customers. A customer who places their faith in your agents has a greater degree of trust in their opinions — increasing their likelihood to buy recommended products.

In fact, 66% of shoppers prefer brands that know them and can recommend items they would like. Using comprehensive customer details, you can make the right recommendations for your customers based on their history and preferences.

The opportunities to gather and analyze data that come with quality customer service — and the right customer service tools — offers your team the chance to significantly increase your average CLV.

Learn more from Gladly: Effectively cross-selling and upskilling are skills your agents can learn and practice overtime. Start helping your agents by giving them these conversation templates.

Use the Right Tools to Offer Radically Personal Customer Service

Beauty brand Ulta utilized Gladly tools like voice, live chat, and SMS to turn their customer experience into a revenue driver using a guest-centric approach to customer service. By pushing personalized incentives to their loyal customers — who made up 95% of their existing sales — Ulta enhanced their shoppers’ overall lifetime value.

Your customer service team has the power to improve customer lifetime value by lengthening shopper relationships and increasing their overall spend. Schedule a demo to discover how prioritizing customer service leads to better relationships, more sales, and a higher lifetime value for your business.


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