Acquisition: CLV by Channel
What it is: A view of the CLV of customers acquired across different acquisition channels
Why it matters: As many channel managers have observed, the behavior of customers can vary quite a bit depending on their acquisition channel or source. Perhaps your Facebook customers stick around and place lots of repeat purchases over time, while your paid search shoppers tend to be “one and done” customers who don’t often come back. Empirically, the CLV of customers tends to vary by 15% or more based on acquisition channel -- so changing your marketing mix can have a big impact on your overall CLV. In order to understand how changes in acquisition strategy are driving CLV, it’s important to regularly measure CLV by channel, and to note when certain channels are driving a greater or lesser percentage of new customer acquisition.
What you can do about it: Identify the channels that are bringing in your highest-value customers and consider investing more in these channels, while pulling back investment on channels that are bringing in lower-CLV shoppers.
Retention: Lifecycle Status Distribution
What it is: A snapshot of where your customers fall within the customer lifecycle status
Why it matters: In our course on Lifecycle Marketing, we explore the customer lifecycle -- a way of mapping the journey that your customers go through in their relationship with you. Over time, some customers are “heating up” (becoming more engaged and active with your brand) while others are “cooling off” (showing signs of churn). Changes in this distribution over time can have an impact on CLV. For example, if you noticed that a lot more customers were becoming inactive or lapsed, this might explain a dip in CLV. It also might point to a retention opportunity by putting a winback strategy in place.
What you can do about it: If you see significant shifts in the lifecycle status distribution of your customers, dig into additional retention triggers (Early Repeat Rate, Overall Repeat Rate, and Winback Rate) to identify segment-specific retention opportunities.
Retention: Early Repeat Rate
What it is: A metric tracking what percentage of new customers have made a second purchase by a certain fixed point in time (for example, by the 60-day mark)
Why it matters: Early repeat rate is a metric derived from cohort analysis, which you can read more about in our Custora U course. The idea is to watch how different groups of customers behave over a similar timeframe in their lifecycles to understand the impact of retention actions. For example, did this year’s holiday shoppers repeat more by their 60-day mark than last year’s holiday shoppers did by their 60-day mark? If so, that might signal that the new cultivation triggers you put in place this year worked well to keep your customers coming back. Since repeat purchase behavior is a key component of CLV, changes in the Early Repeat Rate are often directly linked to changes in CLV.
What you can do about it: Put cultivation triggers in place to educate new customers about your brand and drive repeat purchases. Consider stronger calls to action, including targeted promotions, as new customers show signs indicating that they may be slipping away.
Retention: Overall Repeat Rate
What it is: A measure of your repeat customers’ “depth of relationship” with your brand -- what percentage of repeat customers go on to place another purchase within 60 days of their last order
Why it matters: Early Repeat Rate is great for measuring the conversion of new customers to repeat buyers. But what about all your existing repeat shoppers? Do they tend to return frequently, or only sporadically? The Overall Repeat Rate lets you shine a light on your repeat purchase population and understand what percentage of them are coming back on a regular basis.
What you can do about it: You know quite a bit about the behavior and purchase preferences of your repeat customers. Consider deepening your relationship with them through a cross-sell strategy to introduce them to new categories based on what they’ve bought in the past. And don’t forget “reinforcement” triggers to thank them for their purchases and let them know they’re a valued customer.
Retention: Winback Rate
What it is: The percentage of inactive or lapsed customers in a given period who were “won back” into making a purchase
Why it matters: Churn can be a bit of a tricky concept in a retail setting. After all, unlike a subscription relationship, your customers don’t have to notify you when they decide to stop buying from you for good! So if a particular customer hasn’t purchased for a while, it may be the case that they’re just “resting” between purchases. Alternately, it’s possible that they’ve churned for good, or are starting to look like other lapsed customers from your database. Whether you use a predictive analytics software platform or a homegrown solution, it’s important to be able to identify which customers have become inactive in a given period so that you can measure how effectively you are “reactivating” them. The winback rate does exactly that: it measures the percentage of customers classified as inactive or lapsed, who have placed an order in the period in question.
What you can do about it: Set up winback triggers to re-activate customers as they show signs of slipping away. Consider relationship-oriented messaging and smart promotions to win back shoppers who may have had a negative experience with your sight or who are not responding to your typical email messaging.
Retention: Leaky Bucket Ratio
What it is: A metric showing the number of customers “lost” in a given period relative to the number of new customers acquired
Why it matters: It can often be helpful to put customer churn in context. How quickly are you losing customers -- and how is this impacting the health of your customer base? The Leaky Bucket Ratio benchmarks the numbers of customers “lost” to churn in any given period against the number of new customers acquired in that period. It offers insight into whether you are acquiring new customers fast enough to “plug” the leaky bucket caused by churn.
What you can do about it: Mathematically, there are two ways to impact the Leaky Bucket Ratio -- by acquiring more customers, or by putting effective triggers in place so that fewer customers are lost to churn. But as we’ve seen, there’s often a tradeoff between the number of new customers acquired and the CLV of those customers. Furthermore, it’s almost always more cost-effective to retain your current customers than to acquire a new customer. With all this in mind, the most efficient way to improve the Leaky Bucket Ratio is by putting an effective winback strategy in place to minimize the rate at which customers churn.