Amazon Customer Lifetime Value | How and Why to Continuously Increase It?
What if you can distinguish the highest-paying customers for your business just as you identify the highest-selling items in your inventory?
In that case, you could…
- Know better who to design your customer retention strategies for.
- Focus on offering more value to the most valuable customers.
- Grow revenues with smarter, more targeted marketing and customer engagement efforts.
Amazon customer lifetime value allows you to do just that. It helps to calculate how much money each customer spends over their entire relationship with your business.
Haven’t heard about Amazon’s customer lifetime value model before?
It’s time to fill the gap!
What Is Amazon Customer Lifetime Value?
The lifetime value of an Amazon customer is the summary of all the purchases made by a customer from your Amazon store over the life of their relationship with you.
In other words, it shows how much revenue you’ve earned from a single customer, from their first purchase to the last.
Usually, Amazon businesses just track one-time purchases generated from their advertising campaign. They concentrate on ACoS, or advertising cost of sales, which compares the amount spent on the Amazon PPC campaign with the amount earned from it.
But what if the customer that purchased from your Amazon store with one campaign stays satisfied and returns to buy more already without any additional ad spend? This is what Amazon’s customer lifetime value model will help you track.
Also known as CLV or LTV (Lifetime Value), this important metric reveals the real impact of your sales efforts. It does not just stop on the first sale but measures the continuous impact your one-time sales promotion has on your total revenues over time.
If your customer’s current lifetime value of Amazon is high, you’re doing a great job. This signals high retention rates – proven to be a more cost-effective way to grow sales compared to new customer acquisition.
How Does Amazon Measure Customer Lifetime Value?
We have two pieces of news, one good and one bad.
Bad: Seller Central does not calculate and show you an Amazon customer lifetime value as it does for some other performance metrics. So, you need to go into extra effort to collect and analyze data to calculate CLV.
Good: Specialized Amazon analytics software like SellerMobile has a built-in CLV calculator. You can integrate it into your Amazon account and have the lifetime value of each customer right there at your fingertips.
But before you learn how to use the SellerMobile magic, you probably want to know what lies behind the Amazon customer lifetime value calculation.
Approaches Differ When Calculating Customers’ Current Lifetime Value of Amazon
Different marketers prefer slightly different ways to calculate CLV, but most of them play with the following data.
- Average order frequency – the average number of orders per customer during one year.
- Average order value – total order value per customer divided by the number of all orders
- Annual customer value – the summary of money spent by the customer during a year
- Expected customer lifespan – the business’s estimated duration of a customer staying with them
When all these metrics are in place, you can use the following formulas.
Amazon CLV Formula 1:
Amazon CLV Formula 2:
Some prefer also deducting customer acquisition costs from the CLV to get a more detailed understanding of the true value of their customers.
Automated CLV Calculation With SellerMobile
SellerMobile is a specialized Amazon inventory management software that helps you automate and track Customer Lifetime Value (CLV). To analyze your CLV with SellerMobile, follow these two simple steps.
- Integrate your Amazon Seller Central account with SellerMobile.
- Head to Customer Lifetime Value and Repeat Orders widgets to find your needed data.
Here you can see your customers’ CLVs categorized by how many times they ordered from you.
You can notice one tendency in the above example. Those who ordered more than once from this company have a higher avg. revenue ($459) compared to those ordered just once ($27).
So, what does this data hint to us?
Customers that order more than 10 times from the company are more profitable and worth investing more. If the company invests in better customer service, loyal customers will keep ordering for years, increasing their lifetime value.
Now, take a look at the Repeat Orders section. It will show you which products are ordered more than once and how much you earned from repeat orders.
It seems the picture gets clearer. You know the CLV for those who order many times from you and which products they prefer to reorder.
So, now you can better target your repeat customers with the products they like
So You’ve Got Your Amazon CLV Data. What to Do With It?
When you know how much money flows to your company per customer during a specific period (you can calculate CLV for month, season, year, etc.), you have a strong base to set your budget and allocate financial resources.
When you know how much you benefit from each customer, you can make better decisions on the promotion of your products. Among different sales-boosting strategies (should you run ads? should you focus on retention rather than acquisition?) you can choose the ones that will be covered with your customers’ Amazon customer lifetime value.
Finally, understanding who are your highest paying customers and where they prefer to invest their money is a valuable insight that can help you improve your product or services and make them more desirable. With that information, you can come up with targeted special offers to increase customer loyalty.
How to Keep Amazon Customer Lifetime Value High?
By that time, you should have grasped two crucial truths.
- The higher your business’s customer lifetime value is, the better.
- To increase your buyers’ CLV, you need to focus on retaining and increasing sales from existing buyers more than acquiring new customers.
Here are just some ideas on how to do that.
Become a Member of Amazon Subscribe and Save Store
Amazon Subscribe and Save Store is a section with regularly-purchased items that customers can subscribe to receive on a schedule. This usually refers to household goods and health and beauty products like toilet paper, coffee, detergent, etc. Customers have the opportunity to save up to 15% on regular items if they sign up for a subscription.
Your task here is to include your products in the Subscribe and Save store which will automatically increase CLV due to regular purchases.
To become a Subscribe and Save Store member, you need to meet the following criteria.
- Have a seller feedback rating of 4.7 and higher.
- Have an active Fulfilled by Amazon (Amazon FBA) account with good sales and active for at least three months.
Become Amazon Brand Registry Member
Amazon Brand Registry is a list of authorized Amazon sellers that the platform recognizes and approves as the official manufacturers and/or distributors of a brand.
Whenever your brand becomes an official Amazon Brand Registry member, Amazon gives you specific incentives and support that increase your sales.
For example, you get 100% protection of your product listings on Amazon, which means no fraudster can hijack your listings. You become secure from low-quality third-party sellers who can put your brand on the line with their bad reviews and negative customer service.
Additionally, you get exclusive access to Amazon Brand Registry’s advanced analytics, which reveals your target audience’s customer search and buying behavior.
With these and other privileges, you gain a competitive edge in the marketplace and can increase customer lifetime value for your brand.
To become an Amazon Brand Registry Member, you need to meet just one criterion – Trademark.
To apply for the membership, you need to have an already registered trademark or one pending registration in a subset of trademark offices.
Amazon either accepts text-based marks or image-based trademarks with words, letters or numbers on them.
Apply for Amazon Brand Registry now!
Use Amazon Influencer Program
Amazon Influencer Program is not the same as Amazon Affiliate Program, which limits affiliate marketers in product placement. Amazon influencers are free to promote your product links on any platform outside Amazon – their personal social media accounts, emails, and even other websites.
Things work like in the usual influencer marketing system. You pay high for those who have many followers. Sometimes, if you’re lucky enough, your products might be noticed and recommended by Amazon influencers even without any payment for that.
There are different platforms to search and connect with Amazon influencers. For example, I tried Influence.co, where I could apply many filters like category, location, followers, etc.
Anyone! If you’re looking for Art & Entertainment Niche Amazon influencers in Argentina with 500-1000 Instagram followers, we did the search for you!
Become Active on Amazon Posts
Treat Amazon Posts as a unique search engine system for content in Amazon. You can now create blog-like content for Amazon search results, which can contain promotional links, CTAs and images.
So, it’s a fully-functional content marketing platform that gives you another way to introduce and promote your products.
Whenever buyers search for something in your niche, your post will be visible in search results along with competitors’ listings. So, you need to invest in creating informative, eye-catching and interesting content to stand out and drive potential buyers to your account.
Your Amazon Posts content should be suitable for a general audience, be in the primary language of the Amazon site, and correspond to other Posts’ content requirements.
Continuously Increase Customer Satisfaction
Remember that a returned customer is a happy customer. So, do your best and even more to satisfy your customers and make them return for more.
The key things your Amazon customers pay attention to are simple.
- They want fast deliveries.
- They want to receive the products as described in the listing.
- They want to receive good customer service, especially when they have some problems with a product.
Let’s elaborate on the last part. As contradicting as it may seem, the customers who had some issues with your products may become loyal customers in the future if they are provided with the best customer service to overcome the problem.
Let SellerMobile Alert You Whenever You Need to Take Action With a Dissatisfied Buyer
SellerMobile tracks all customer reviews and feedback on your Amazon account and notifies you whenever a bad review appears.
The cool thing is SellerMobile does this even when you’re logged out of your seller account. So, it leaves no chance for you to have an unnoticed negative review or have it stay too long in your account.
Set SellerMobile notifications for negative customer feedback and get notified whenever your fast reaction can save your seller’s reputation.
Leverage the Voice of the Customer
VoC is not a technical metric and we can’t measure it as we do with Amazon customer lifetime value, sale through rate, etc.
The voice of the Customer is more of a qualitative metric that should be constantly collected, monitored and analyzed.
The easiest way to do it is to use customer surveys. As simple as that, create a quick survey with the key questions that can reveal the WHY behind your customer experience.
For example, ask questions like:
– Why did you choose our products?
– What do we do well?
– Are there any features that could be improved?
– How likely are you to recommend our products to a friend or colleague?
Collect the answers and derive insights from them. Analyze every single answer and find out what makes people come to your account and buy or why they tend to leave unsatisfied with their purchase. Act accordingly.
Bundle Complementary Products
Facts show Amazon bundles boost sales. That’s because your buyers love good deals when they can get more for less. Just form product bundles that will go well together and add your chosen ASINs together in Amazon virtual product bundles tool.
If the bundle is formed smartly and the products are useful together, you can significantly increase your sales. Just give it a try!
High Amazon customer lifetime value is a desired result that is worth every effort. It’s your guarantee of steady revenue from your Amazon account and a sustainable business.
Why not multiply the revenues from the customer that you have already managed to attract?
Think about that and include the constant increase of CLV in your Amazon business strategy.