A Full E-Commerce Guide to the Customer Experience and Cost

An e-commerce guide to understanding the customer journey, customer lifetime value (clv), and customer acquisition cost (cac)

E-commerce has become more popular than ever before in the wake of the 2020 pandemic. It is an industry that has seen many success stories, but at the end of the day, it is a sink-or-swim market. What are the critical factors that can decide an e-commerce company’s success? For that answer, a company must first understand the customer journey, customer lifetime value (CLV), and customer acquisition cost (CAC).

The Customer Journey

The customer journey is the process and experience of how e-commerce products are ordered, delivered, and perceived by customers. The perception of the customer journey begins the first time a customer learns of a product’s existence and continues through delivery, use, and throughout the cultivated relationship.

However, what makes some customer journeys more impactful than others? Customer engagement, outreach, ease of access, and customer support are elements of ensuring a positive customer journey.

Customer engagement and outreach come down to keeping e-commerce customers in the know. They want to know exclusive offers, limited sales, and order and shipping updates. Keeping customers in the loop through short messaging service (SMS) about these things is essential to making customers feel valued.

Ease of access is simple but effective if executed correctly, allowing customers from all walks of life to navigate an e-commerce company’s website easily. Having a streamlined, simple-to-use, and visually appealing e-commerce website is the best way to ensure ease of access.

Customer support is vital to the customer journey, especially to retention and satisfaction. When consumers hit a bump in the road, such as a misplaced order or complications with an e-commerce website, customer service is where they go. Consumers want a quick and easy customer service experience to resolve any issues. This is why ensuring an e-commerce company’s customer service staff is well-trained, friendly, and helpful to customers is a priority. All of these aspects culminate into the entirety of the customer journey.

Customer Lifetime Value (LTV)

Customer lifetime value is the individual value of a specific customer based on their purchases on a website over time. It is also usually linked to customer satisfaction metrics since a customer will typically return if satisfied.

LTV is one of the most crucial data points when measuring customer satisfaction, specifically what works and is not beneficial. LTV does a great job helping e-commerce companies understand the aspects driving sales and increasing customer lifespan.

By collecting data, e-commerce companies can reallocate resources to the things that are increasing sales and cut unnecessary costs. It also allows companies to pinpoint their most profitable customers and reward these specific customers for being loyal. These customers can be offered deals, coupons, and sales specific to them to keep them loyal and purchase more frequently.

Loyalty programs can also increase customer lifetime value. Making customers feel like they are being rewarded for their loyalty to a business will make them come back more often. When this occurs, LTV increases overall profits for an e-commerce business drastically.

When it comes to selling to customers, existing customers are very important. Any given business is about 65 percent more successful in selling to existing customers than new customers. Customer retention is much more important than customer acquisition. A good customer lifetime value number usually is three or four times higher than average customer acquisition costs. Anything below this needs attention and care to increase profitability.

How can a business increase customer lifetime value? Cross-selling items is a great way to begin driving up LTV. Bundling certain items together that are normally bought simultaneously is an excellent example of cross-selling.

Utilizing user-generated content is a very underrated way of improving LTV. User-generated content is anything from customer reviews to testimonials or even social media posts showing off a product.

People trust other people’s opinions on specific products and services more than they trust a business’s opinion. This is why user-generated content is so important. Posting these testimonials and reposting product reviews on social media is a fantastic way to implement user-generated content to increase customer lifetime value.

Customer Acquisition Cost (CAC)

Of course, e-commerce businesses want more customers, but what is the average cost of acquiring these new customers? Every e-commerce company wants to spend less to acquire customers and receive more in lifetime value. Customer acquisition cost (CAC) encompasses the cost of acquiring a single customer. This includes marketing, product, labor, and other costs associated with getting a product to a customer.

CAC is vital because it allows businesses to see how much profit they need from individual customers to cover their acquisition costs. Basically, if the cost of acquisition is greater than the profit per customer, there will be a net loss.

How is CAC measured? The simple answer is if a $1000 advertisement brought in five customers, the CAC is $200. Cost over customers is the most simple formula. So how can a company increase this margin? Improving advertisements and marketing campaigns is the best way to increase CAC.

By having more appealing and enticing content in the advertisement, it will get more clicks online. If an e-commerce business has an excellent CAC but isn’t profitable, goods costs may need to be increased.

Raising costs makes it possible to lose some customers but increases margins. Finding the perfect middle ground from competitive prices to profitable prices is vital. User-generated content is essential not just for LTV, but for CAC, too. User-generated content such as social media testimonials, reviews, and product evaluations create organic site traffic at no cost to an e-commerce business. When it comes to CAC, there’s nothing better than free.

Capitalizing on Customers

Customers’ experiences with e-commerce companies determine margins of profit and what the future holds for specific companies, which is why focusing on customers should be the most important thing for companies. Utilizing metrics such as customer lifetime value and customer acquisition costs are great ways to increase profitability. Companies that capitalize on mastering these aspects will thrive for decades to come.

Call in a Professional

At POLA Marketing, we understand that owning an e-commerce business is taxing, and implementing customer journey, customer lifetime value, and customer acquisition cost strategies can take a lot of work to maintain appropriately. POLA Marketing is a full-service marketing agency that can implement data-proven tactics with its talented team of experts to elevate an e-commerce company to success.

For more information, contact us at (https://polamarketing.com/contact/).

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