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The ultimate guide to ecommerce lifecycle marketing

In this lifecycle marketing guide, we recommend approaches that are backed by data and repeatable. Our goal is to take the guesswork out of the process of getting to know your customers online. We’ve consolidated our knowledge and everything you see in this guide is built into CustomerVox. We believe making this accessible to Shopify stores and saving your time by automating stuff is the way to go. There is nothing stopping you from doing this on your own if you wish.

We’ve put together a complete, actionable, and straight to the point guide on ecommerce lifecycle marketing based on what we’ve learned from working with multiple ecommerce stores with over one million customers, from working with industry leading CMOs, and during the process of building CustomerVox.

In this lifecycle marketing guide, we recommend approaches that are backed by data and repeatable. Our goal is to take the guesswork out of the process of getting to know your customers online. We’ve consolidated our knowledge and everything you see in this guide is built into CustomerVox. We believe making this accessible to Shopify stores and saving your time by automating stuff is the way to go. There is nothing stopping you from doing this on your own if you wish. 

Customer journey and how to interact through the different stages

Contents

  1. Basic principles
  2. Lifecycle marketing stages
  3. Customer acquisition (click, convert, personas)
  4. Customer retention (one-time, active, at-risk, lost)
  5. Campaigns, recommendations, abandoned carts
  6. Summary

1. Basic principles

Let’s start with basic principles first. What is the goal of marketing when it comes to ecommerce (or any industry)?

The goal is to maximize future cash flow for the business, thereby maximizing the value of the company.

And how does the marketer maximize future cash flow for the business? By maximizing the future value of every potential and existing customer.

The process of maximizing the future value of every customer is termed lifecycle marketing. It’s a fancy term but the underlying principle is really simple. It involves putting each customer at the center of your business. The focus is on understanding what stage your customer is at with your brand, and taking steps to nurture a deeper relationship with him or her through a personalized shopping experience.

Product, product, product

Before diving into lifecycle stages, it’s important to set things up so the odds of the game are in your favor. There is no point optimizing for retention, acquisition, and funnels until you know you have a service offering that customers want. That’s why a lot of the unfiltered advice out there for early D2C ecommerce businesses is about finding the right niche, product, and knowing your customers.

Remember that having the right product or niche is the difference between having to speak to 1,000 or 100 customers to get one paying customer.

With that, we’re ready to look at each of the stages in detail.

2. Lifecycle marketing stages

Lifecycle marketing involves categorizing all your potential and existing customers into one of six lifecycle marketing stages: click, convert, one-time, active, at-risk and lost. This is illustrated in the diagram below:

Lifecycle marketing stages illustration

The number of customers in each stage decreases from left to right. The lifecycle is like a funnel, except the goal is to keep customers in the active stage rather than letting them go out through the end of the funnel.

In CustomerVox we track visitors (unknown) and then categorize contacts. Members are contacts in the convert stage whose identity is known to you — i.e, you have their email address.

CustomerVox ecommerce customer lifetime stages

The click and convert stages are part of the customer acquisition funnel. The goal here is to get a customer to make his first purchase. This means reaching out through different channels to customers who do not already know you, educating them about your brand values and why they should buy from you, while also incentivizing them to make their first purchase.

The one-time, active, at-risk and lost stages represent the customer retention process. The goal here is to keep a customer loyal to you. This means making a customer trust and like your brand enough to make their second purchase. It also means giving a customer who is disengaged a reason to buy again.

The goal of lifecycle marketing is to move customers from a stage of lower value to a stage of higher value.

To understand this, we need to introduce the term Customer Lifetime Value, or CLV. CLV is how much each customer is worth to your business. In technical speak, CLV is the present value of future cash flow that a customer is expected to bring to your business.

The CLV of each customer is different based on the stage. Active customers have higher CLV. Potential and at-risk customers have lower CLV. This also means that most of the value of an ecommerce business comes from its one-time and active customers.

3. Customer acquisition

The customer acquisition process is all about finding new customers at a cost that is less than the value that the customer brings to your business. The two stages in customer acquisition are click and convert. Let’s look at each of them:

Click

The click stage is all about getting potential customers to hear about you and “click” onto your website. This is also known as the “reach” stage. The idea is you want to reach out to as many customers as you can through different channels.

Just to highlight the obvious, the lowest possible cost of a click is zero. That’s why a lot of people recommend you spend your time reaching out through free channels first. These are tactics like being active on Facebook groups, creating social media pages, or reaching out to friends and family. If you acquire customers through free channels, the customer acquisition cost (CAC) is zero and you most definitely meet the goal of customer acquisition.

However, the reason why we call this the “click” stage is because one of the best ways to scale the process of finding new customers is through paid channels like Facebook, Instagram, Google and influencer marketing. In all these cases, you pay for customers to click onto your website.

Convert

After a customer visits your website, they now know about you. Your next goal is to convert them, which is to get them to make their first purchase. The goal here is to maximize the likelihood of conversion.

Conversion comes from building trust, social proof, and purchase intent. On average it takes around seven interactions before a customer trusts you. Only then do customers feel comfortable enough to buy anything from you. An interaction can be anything from an email or a retargeting ad, to an influencer featured on your website, or a magazine feature.

In the convert stage, there are two types of customers:

  • Identity unknown to you: They appear to you as a Cookie ID or Session ID.
  • Identity known to you: You have their email, mobile number, or some form of contact (they are also tracked via cookies and sessions).

You can convert both known and unknown customers using retargeting and on-site recommendations:

  • people who bought this also bought
  • new products, trending products
  • recently viewed

For known customers, you have more chances to experiment with different messaging to build trust, value, and purchase intent that maximizes conversions.

The idea behind maximizing conversions is to identify what conditions must be satisfied to lead to a purchase. For instance, you might find that customers who know your brand values, who have read your FAQs, and who have seen famous people wear your brand are likely to make their first purchase. Then, perhaps your strategy would be to include your brand values and influencers on your home page and send a link to your FAQs in your welcome email.

Putting click and convert together

The goal of customer acquisition is to find new customers where Customer Acquisition Cost (CAC) < Customer Lifetime Value (CLV).

CLV was introduced in the lifecycle marketing stages section above, but how do you calculate CAC? Here it is. The two stages in customer acquisition are click and convert. CAC is calculated from The Cost Per Click (CPC) and Conversion Rate (CR), such that:

Customer Acquisition Cost (CAC) = Cost Per Click (CPC) / Conversion Rate (CR)

To run a profitable business, you want CLV to be 2–4x CAC.

Knowing your customer personas

Making the equation work is also about being better at finding your best customers. Once you have an active ecommerce store, the CustomerVox Personas can help you figure out who your personas are and how valuable they are to your brand. 

CustomerVox personas

Insight into personas provides two ways to view and approach your customers (on top of the obvious which persona is more valuable):

  • Which products go well together?
  • What makes the product mix more profitable? 

It’s smart to take advantage of this data. Think of ways to target these customers (e.g., with PPC ads). Can you add products to tailor to certain personas and increase the order value?

Now it’s time to move on to customer retention.

4. Customer retention

To recap, the goal of marketing is to maximize potential cash flow from each customer. This is achieved in lifecycle marketing by moving customers from a stage of lower value to a stage of higher value.

After customers have made their first purchase, the goal is to retain them. They fall in one of four stages: one-time, active, at-risk and lost. Let’s look at each of them:

One-time

Hurray! Your customer has made his first purchase. You’re not quite done. In fact, you’ll see that one-time customers are the biggest population of known customers for most brands.

According to CustomerVox data one-time customers often make up 70–80% of the population of paying customers for an ecommerce brand. This means that the strategy to convert customers from one-time to active is often the area of largest opportunity in customer retention. This is also why we look at one-time as a population separate from customers who bought two times or more.

CustomerVox can tell you about the lifecycle distribution of your customers. Chances are, most of them are in the one-time category.

Customer lifecycle stages when using CustomerVox

Note also that active customers have the highest CLV. That’s why the goal of lifecycle marketing is to move customers from a stage of lower value to a stage of higher value. Each time you successfully convert a one-time customer to active, your business may not increase right away in cash value, but your expected future cash flow does increase.

With one-time, the goal is to craft a message to encourage customers to make their next purchase. Typically, the email will include a receipt followed by action or actions that you want to encourage. In CustomerVox, we call these automations. Common actions that we see include:

  • Motivate second purchase (e.g., recommendations based on that purchase)
  • Build social proof (e.g., request a review)
  • Build brand value (e.g., remind them about your core values)

Example (Motivate Second Purchase): Protest

Protest

Example (Feedback): Target

Target

Active

Active customers are customers who have bought twice or more. Customers who have bought twice are often considered to be loyal and engaged customers. It is the goal of every lifecycle marketing tactic to move customers along to this stage.

The easiest automated action you can take for active customers are receipts. In fact, receipts are the first thing you should personalize because they apply to every purchase made through your store.

As per the one-time scenario, you would give the customer a summary of their purchase, followed by some actions you want to motivate. Good ideas include:

  • Word-of-mouth (e.g., ask them to refer a friend for a cash voucher)
  • Build social proof (e.g., request a review)
  • Feedback

At-risk/lost

We can talk about the at-risk and lost lifecycle marketing stages together because they both represent customers who used to be active but are increasingly disengaged. It makes a lot of sense to try to win these customers back because it reduces churn in your business.

We define at-risk customers as those with a less than 50% probability of making a purchase in the next 24 months. We define lost customers as those with a less than 10% probability of making a purchase in the next 24 months. However, businesses look at this in different ways.

Most ecommerce businesses do winbacks. They look in their CRM tool for customers who have not bought in 12 months. They then extract the list and send a campaign with a promotion.

Here’s the problem with this approach: The best time to win back a customer is at the point when he becomes at-risk because that is when the likelihood of conversion back to active is highest.

The active customers become at-risk and lost at different points in time. If you send a winback campaign at a fixed point in time, there will be customers in that group who are already lost or who have been at-risk for a while. This is clearly suboptimal.

The better way to do a winback campaign is to send your winback email immediately when customers become at-risk. You can see an example of this in our CustomerVox at-risk automation. That way, you maximize the likelihood of a customer coming back. The same principle applies to lost customers.

5. Campaigns, recommendations, and abandoned carts

There are a few other things that do not fit into a particular lifecycle marketing stage but are very important because they apply across lifecycle marketing stages — campaigns, recommendations, and abandoned carts. We’ll cover them below.

Campaigns

Campaigns are any sort of messaging that you send to groups of people. Email is the most common channel but you can also use SMS, or similar tactics.

Campaigns usually fall under the following categories:

  • Holiday promotions
  • Sales
  • New product launches
  • Events

Email campaigns can take up a lot of your time because each one is written in a different way. This means rethinking copywriting, content, the hook, etc. For big brands, this is often a cross-department effort involving the marketing team, content team, data analytics team, and marketing vendors. For smaller brands, it may mean limiting campaigns to only the ones that bring you bang for your buck and focusing on tactics that can be automated first — recommendations and transactional emails in lifecycle marketing.

Campaign type marketing is less effective because modern consumers hate being marketed to and the top ecommerce brands have learned how to personalize emails for customers. Take for instance this example email below.

Fleet Farm

CustomerVox research indicates that campaign efforts should be focused on time-sensitive content such as holiday promotions, events, and new product launches because these give you a reason to speak to the customer. The more you are able to personalize your campaign content, the more customers will look forward to receiving campaigns from you. Otherwise, it is better to communicate with customers with lifecycle marketing (i.e., transactional emails).

Recommendations

Recommendations increase the likelihood of conversion by showing customers content that is relevant to them. Recommendations can be used on-site and in campaigns. When done right, recommendations can easily contribute to 10% of your sales and increase sales conversions on campaigns by 2x or more.

Many marketing tools allow you to include recommendations in your templates and on your website. For instance, CustomerVox Smart Blocks recommends products just as a customer is about to leave your page on mobile and desktop, increasing the likelihood of conversion.

Abandoned carts

Abandoned carts deserve a special mention because they are the email that will get you the biggest bang for your buck. Many customers add items to their cart but do not complete their buy. In other words, they abandon their shopping carts.

Look at these statistics from Baymard. An average of 66% of carts are abandoned.

Recovering 10% of your abandoned carts means a 20% increase in sales.

For every $100 worth of product added to your cart, assume $67 are abandoned and $33 are sales. If you recover 10% of $67, or $6.70, you effectively make $6.70/$33 = 20% more in sales.

CustomerVox shopping cart abandonment automations allow you to send cart recovery emails or display a popup right before a customer closes their browser. Shopify allows you to send one recovery email, but with CustomerVox you can send multiple emails and also display popups at just the right time.

6. Summary

Phew, that was a lot of stuff. Quick recap.

In summary, every customer can be categorized into six lifecycle marketing stages:

  • click
  • convert
  • one-time
  • active
  • at-risk
  • lost

The goal of lifecycle marketing is to move customers from a stage of lower value to a stage of higher value.

You do that because you want to maximize the value of your business, which comes in the form of future cash flow.

The click and convert stages are related to customer acquisition. The goal is to acquire customers such that Customer Acquisition Cost (CAC) < Customer Lifetime Value (CLV). In customer acquisition, the tactics that give you the best bang for your buck are on-site recommendations and focusing on one or two channels with the highest ROI.

The one-time, active, at-risk, and lost stages are related to customer retention. The goal is to convert customers to the active stage, which has the highest CLV. In customer retention, the tactics that give you the best bang for your buck are recommendations, receipts, cart recovery emails, and winback campaigns.

Over to you

That’s it! If you’re thinking about boosting your ecommerce business, these lifecycle marketing strategies will work for you. 

Before diving into your data, you need to have a good understanding of your product and who your customers are. Doing that right makes everything easier. It takes a lot of effort to get to know your customers, find your niche, and refine your strategies, but CustomerVox takes care of this automatically. When you see those orders coming in… it will all be worthwhile!

If you have any questions about overall lifecycle marketing strategy, then please get in touch!

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