Here’s a common-sense point that every business owner intuitively understands: It’s good to get a one-time customer, but far more beneficial to have a loyal client who comes back again and again to make repeat purchases.
The difference between one-time and repeat customers gets to the issue of customer lifetime value, a core metric for assessing the success of any print on demand business. Whether you’ve set up a store on Shopify or some other platform, it’s important to know what customer lifetime value is, why it matters, and how it can be calculated.
Here’s a quick rundown for print on demand companies, both on Shopify and off.
What is Customer Lifetime Value?
To begin with, what are we talking about when we talk about customer lifetime value?
Basically, customer lifetime value is an evaluation of a customer’s total worth to your business during the entire course of your relationship with them. In other words, customer lifetime value doesn’t just consider how much a customer is worth on a purchase-by-purchase basis, but instead shows the total worth they bring to your business over time.
Why Does Customer Lifetime Value Matter?
Customer lifetime value is important for a number of reasons, starting with this one: It’s generally less expensive to keep existing customers than it is to bring in new ones. (Think about the costs that can be associated with customer acquisition, including advertising and marketing expenses associated with raising brand awareness and convincing the customer to make that initial purchase; by contrast, simply keeping up with returning clientele, who already know basically what to expect from your business, tends to be a lot cheaper.)
The upshot for print on demand companies is that it’s wise to increase the value of existing customers; indeed, this can be one of the most effective ways of driving growth.
Additionally, customer lifetime value can be a useful metric for determining which of your advertising and marketing endeavors are more successful. Say you spend $100 on a PPC campaign, just to bring in one customer. If that customer only makes one $20 purchase, you’ve actually lost money. But if that customer becomes a regular and ends up spending $400 over the span of several months while also recommending your business to their friends, then your return on investment starts looking much rosier.
What About Customer Acquisition Cost?
We’ve hinted at this already, but the lifetime value of a customer goes hand-in-hand with the customer acquisition cost. The latter is a reflection of how much money you need to invest in order to attract a new customer. Think in terms of advertising and marketing efforts but also special offers, promos, etc.
Customer lifetime value really only makes sense when you consider it in terms of customer acquisition, so being able to run both metrics is essential for print on demand companies.
How Can Print on Demand Shopify Stores Calculate Customer Lifetime Value?
If you have a print on demand Shopify store, there are a number of apps you can install that will help you calculate these important analytics.
One of the most popular is an app called Lifetimely, which essentially provides you with a full dashboard of customer data points and analytics. Not only can this app help you determine the value of specific customers, but it makes it easy to pinpoint the customers who are bringing the most value to your print on demand business.
Note that Lifetimely does come with a small monthly subscription cost. If you want to try out some free apps for calculating customer lifetime value, there are a number of less-robust but still decent options to choose from.
Making Informed Decisions About Your Print on Demand Business
As you seek to make sound strategic decisions for your print on demand company, it’s vital to work with a good set of data. Customer lifetime value analytics should be at the top of the list. If you’re looking to increase your customer lifetime value, using a reliable, secure on-demand provider, like Gooten, is vital. Contact our team today to get started!