With Rising CAC, LTV May Be The New North Star for Many E-Commerce Businesses

This is nothing new, but there’s definitely more attention to be paid here. Having a high LTV (life time value) can be a CAC (customer acquisition cost) problem solver. Why? The higher your LTV, the higher you can spend on acquiring a customer. Ultimately, these two metrics work side by side in a ratio. (LTV:CAC)

[From KlipFolio] An ideal LTV:CAC ratio should be 3:1. The value of a customer should be three times more than the cost of acquiring them. If the ratio is close i.e.1:1, you are spending too much. If it’s 5:1, you are spending too little.

With the rising cost of CAC with the change from iOS14 and other macroeconomic issues, one place where businesses can find wins is in retention to achieve higher LTVs.

While most teams and businesses do focus on acquisition, as they should, and that is the growth engine of most companies, the math will never make sense or reach true scale and potential without optimizing for the LTV metric.

It can cost up to five times more to acquire a new customer than to retain a current customer. Need I say more?

So, how do you achieve higher LTV? RETENTION STRATEGIES. You may already do these, most I hope you do, but having this marketing mix is crucial. QUCIK, LETS GO…

1. EMAIL MARKETING: Having a sound email marketing strategy to help and educate consumers on your product, pain points, and overall education to keep them engaged and wanting to read more newsletters that provide value to them. If they don’t find value within your content, they’ll flock elsewhere. Email is the best way to keep them engaged.
   
   
2. SMS MARKETING: Text messages have an incredible open rate. This is a great sales channel but also a great channel to keep customers coming back when you announce a product release or sale. This is also a great channel to offer your customer list special discounts, specially those that haven’t purchased in a while. Same goes with email.
   
   
3. PUSH NOTIFICATIONS: Easy win here. More and more people subscribe to these notifications as they are very non-invasive for consumers. Do not fall asleep on this. They work.
   
   
4. BEST-IN-CLASS CUSTOMER EXPERIENCE: This seems like a cliche but couldn’t be more true. Ensure a great customer experience for customers and they will keep coming back. This is proven…it’s not some theory people preach for no reason. Invest in your customer service as much as you invest in your marketing.
   
   
5. LOYALTY PROGRAMS: Most of the bigger companies in the world such as Starbucks have loyalty / reward programs. If you have a product that is constantly being purchased on a monthly basis, this can be an easy way to incentivize customers to keep coming back to reward their spend.
   
   
6. BRAND GOODWILL: It’s always a GREAT thing when a customer can connect with a brand on an emotional level. It makes a difference, it really does. Whether you’re focused on environmental initiatives or anything else, communicate this messaging to your customers. It makes them feel good to be connected to a brand that’s doing good. It’s that simple.
   
   
7. ACTIVATE YOUR SOCIAL CHANNELS: Your customers are on social media, no doubt about it. They are on platforms such as Facebook, Instagram, and more. Make sure they see you active there to stay on top of mind. May be worth boosting some social posts to retarget them.

These 7 strategies can go a real long way. Just doing a few, and doing it well can pay big dividends in optimizing this metric.