SKU’d Thoughts 18: How can DTC brands increase customer lifetime value?

Last week Jeremy Liew, a partner at Lightspeed, asked on Twitter — How can digital native vertically integrated brands (DNVBs) increase customer lifetime value (LTV)? LTV is a customer’s worth to a business over the entire period of their relationship; the simplest calculation is customer revenue minus customer acquisition cost. Liew’s tweet got numerous replies ranging from increasing prices to increasing product portfolio.

Here are my 3 recommendations for brands to increase LTV.

Hassle-free Returns. Research has shown that customer-centric return policies are highly correlated with an increase in purchases. Returns usually involve different variables, the three most important being:

• Time: What return window are customers given?

• Money: Do customers get a full refund, is shipping deducted or are they given store credit?

• Effort: Does the retailer provide a prepaid shipping label? Customers are more likely to spend money on a site if they know they have enough time to easily return unwanted items for a full price.

Fast Delivery Options. As competition for customers in the DTC space increases, companies have to continually set themselves apart. Quick delivery options are certainly one avenue for upgrading customer experience that ensures customers will have your brand top of mind. Amazon’s two-day shipping option is an excellent example of this; customers automatically use Amazon for staple items because of the assurance that they will receive it quickly.

Loyalty Programs. Rewarding your most loyal customers is always a wise move in business. DTC brands can develop loyalty programs that provide their devoted customer base with early access to product offerings. This type of loyalty program has two benefits: it provides the company with valuable data on new offerings and it rewards a naturally early-adopter customer base with access to new products.

Although it might seem the simplest way to increase LTV is to reduce the cost of acquiring a customer, those costs have been increasing across the board in DTC. The key is ultimately great customer experience and my recommendations are additives to providing customers with a reason to return time after time.

Cross posted on Medium