- Need to calculate the customer lifetime value
for your store?
Well, you're in the right place,
'cause I'm gonna walk you through a step-by-step
in this video.
Let's go!
(air whooshing)
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(air whooshing)
Okay, so in this method, I'm gonna show you
how to calculate the Customer Lifetime Value for your store.
Keep in mind that this does require you
to have been running your store for some time.
You need to already have orders already
made people have poachers from your store
and you have customers with that in mind.
Let's jump into my computer and let's get into it.
Hey guys.
So now we're in the Shopify dashboard.
I've gone to the order section here.
So now we can see all the orders
for the store and we want to click export all orders
plain CSV file and click export orders.
So once we do that, it's going to take some time.
And then it's gonna send us an email
with a link to download all the orders for the store.
It can take a bit of time depending on,
on how many orders you have.
Okay guys.
So now we've got this email from Shopify
with a link to the CSV that we exported.
We're gonna click the link.
It's gonna download that file.
Once it's downloaded, open that up, it's gonna open
up in whatever spreadsheet software you have.
If you don't have any spreadsheet software
you can actually drag this straight into Google sheets
or Google drive, and it will let you open it in there.
We're gonna copy everything.
So I like to click, click that triangle
at the top and it copies, it selects everything,
then you can copy, go back
into Google sheets and create a new Google sheet
and paste this, paste values only.
So it doesn't take all the formatting or anything like that.
That might be in there.
It does save a bit of time as well.
Once it's pasted, we've got it all there.
I do like to filter it just
'cause then it allows me to manipulate that data later on.
What we're gonna do is open up a new tab.
And this is where we're gonna do the calculations.
I'm gonna put the formulas
in the description so you can just copy
and paste straight into your Google sheets.
What we're gonna do is we're gonna put
in equals unique, what this is gonna do
it's going to get all that unique emails for our customers.
So boom.
So it's listed out already all the emails for our customers
which there's a lot for this store.
What I'm gonna do actually is I'm gonna put this
at the very top, so I can even just move this actually.
And that's gonna move all of them up to the very top.
Fantastic.
So we have a list of all the customers
even if they've completed many orders
it's only gonna show them once because it's the unique,
then the unique value.
Next we're gonna do is equals COUNTIF,
so what this does is it counts how
many orders we've actually had for each person.
So we're gonna select all the emails in the sheet
and then we're gonna go back here
and the criteria is gonna be that email.
So once that's done, press enter, select
and then we're gonna copy this.
And then we're gonna go all the way down
to the bottom, the bottom one, hold shift, and click paste.
And then it's gonna paste all of those in there.
And we're gonna see already who
or how many orders each has had.
I'm gonna change this, the number of orders.
And the next thing we're gonna do is we're
gonna get the total value of each customer.
So we're gonna do the same thing
but we're gonna use SUMIF
and we're gonna go back and get the range.
And the first one we're gonna get is the range
of all the emails, select all of that, comma.
We're gonna go back and select email again, comma
go back and then select the total
which is what we're going to sum.
It's a boom.
So we have that in there.
We're gonna add the pricing.
So it changes to the actual price.
I'm gonna copy this, scroll all the way down, hold shift
select them all, paste.
It's then gonna paste in all the values.
It's basically what this formula is doing.
It's going back to that sheet and going okay.
If it's that email added up, keep adding them all up.
And so ones that have multiple purchases
it's gonna have them,
they're all added up like that.
That's fantastic.
Okay, cool.
Awesome.
So now that we have that
what we can do here is get Customer Lifetime Value
and average purchases per customer customer.
So these are both really awesome metrics to know about.
It's what we can do here is just really easily
just go average and then just select all the orders here,
all the different people, sorry.
So the average, the Customer Lifetime Value is
$640 for this store and the average purchases per customer,
same thing.
Let's just select this column, boom.
So not many
but the average person purchases 1.06 times basically.
So they're not getting many repeat customers.
So this is a good sign that maybe this store may
or may not be delivering great products.
Maybe they're not doing much retargeting
or marketing after someone purchases.
So I would say it's a big opportunity here.
And this is the customer lifetime value.
So how much the, each customer is actually worth.
And now we're gonna go into some steps
and tips on how we can actually improve that.
So that should be everything to calculate everything
for your store.
If you have any problems, please leave a comment
and I'll answer them as soon as I can.
Thanks for watching this video.
Okay, so now
that we've calculated our Customer Lifetime Value
how do we actually improve this metric?
Something that's really important to keep
in mind here is that the customer lifetime value is made
up of two main parts.
If you can increase either of these parts
you're gonna improve the Customer Lifetime Value
of your store.
And you're just gonna be more profitable
generate more for your store.
It's gonna be worth more.
If you want to sell it later.
The first one is the size of the order,
when someone buys from you.
The second is the number of times, someone buys from you.
In other words, get people to spend more money
per transaction and then come back and spend more
and you're going to increase your Customer Lifetime Value.
Okay, so the first one
how do we increase the average order value?
That is, how much someone spends on one time on your store.
I've actually done an in-depth video
for calculating this and improving it.
So I'll leave a link in the description.
Please go check out that video.
'Cause I do go deeper into this section.
The first tip I recommend is having some sort
of free shipping threshold.
Usually I do recommend having free shipping
across the whole store, but if you can't do that
then you can offer a free shipping
over a certain amount purchased.
For example, someone comes to your store
they have to pay for shipping up to $100
but over $100, they get free shipping.
This is gonna incentivize people to spend more
and get that free shipping tier
because they think it's free.
Even though you've included that
into the actual pricing for your products.
The second one is very similar
but you can offer discounts if they spend a certain amount.
So say for example, someone spends $150 in your store.
That's great because it increases your average order value.
What you can do is give them a five, 10% discount.
If they spend over $150, maybe $200, it's up to you.
What I recommend with all these tips is
calculate your own average order value and then set a goal,
save at $100
and you wanna get that up to 120, well then work out.
Okay, well then if people spend
over $150 and they get free shipping,
that's not gonna help all orders, but many of them
they will go for that 150.
And you're gonna see your average order value
increase bit by bit.
Another tip is you can have bundle deals.
So buy one, get one 50% off.
That's pretty standard.
You can also do cross sells and upsells.
So cross sells is when you offer another product
that's similar, but it's a replacement
for that product that they're looking at.
Someone might come into your store
from Google ads and they come
in clicking on one product 'cause they thought, oh
that fits my price point.
But underneath you can have related products
and suggest a product that might be more expensive
but they'll see, oh
this actually solves my need much better.
And they're willing to pay for that.
And boom, you just increase the average order value.
The other one is upsells.
So this means they might get the checkout
and you can recommend different accessories
and different other products that they can buy
to improve their experience.
Add more value to that order and boom
that same customer acquisition costs
and you've increased the average order value.
Another one that's really easy is to add gifts
if they spend over a certain amount.
So say if they spend over $500
which could be a big amount for your store
you can give them a free cover or a free toy or some sort
of free thing that does compliment or help that product.
Maybe in some way, I wouldn't make it totally unrelated.
I would make that related and actually in your niche
but you can have some sort of free gift
and you can even pay for this at cost
but just having it there as an incentive, that's
free can really help increase that average order value
'cause people love free things just like free shipping.
And so having that there
people are gonna be more incentivized to buy
that higher price product or increase their order value.
And then you can benefit
from that from an increased average order value.
Okay, the second thing that you wanted to,
is increase the average amount of times
that someone purchases from you.
We're talking about repeat customers here people,
we want people to come in
buy from you and then later come back
and keep buying keep buying.
You spend all that money in the start.
If you can get that person to keep repeat purchases
from you, that's gonna be way better
for your profitability in the long-run.
And this is really how you build brand,
the easiest way to do this.
And what you should be doing already is just
have good value, just provide great customer service.
This means free shipping swift responses
to all the live chat emails
and phone calls, everything like that.
It means shipping as quickly
as possible lower the handling times just
make the customer experience as good as possible, as good
as you possibly can because if someone experiences good
from your store, they're not frustrated.
Then they're gonna come back and keep purchasing.
And that's really how you build a brand.
Another thing you can do to increase repeat
customers is to sell a product that people keep on buying.
This might be something like a subscription box
subscription service, or even in a niche where
people love to keep expanding and buying other items.
This can be a product that maybe runs out
or expires and people wanna keep buying
to keep having a great experience.
One example I have is, I have some buddies
that sell travel SIM cards
and I've helped them scale up their store big time,
what they sell travel SIM cards.
So people go flying overseas and they wanna have data
in overseas countries without paying crazy roaming fees.
Well, they have a lot
of travelers that will have a great experience.
The first time they pay all this money
acquire them through ads and then they will go
on their trip the next year
and the next year and the next year.
And they keep buying
and they didn't have to keep spending money
on this customer to keep getting them in the funnel.
They can just retarget them with, with email marketing
and also some basic retargeting ads and boom
you've just got a repeat customer
from a product that gets used up
and people keep wanting to use it.
It's a great, great thing.
Okay, I touched on this a little bit
but another big thing you can do is retarget past customers,
save someone comes into your funnel.
They purchase, you add them
to an audience where you can do retargeting ads
on the display network on Facebook
as well as email marketing.
And you can really pull them back in
for a second purchase and you can set some sort of timer
some delays so that you send out email campaigns
some sort of post-purchase flow
after they've converted, but wait, say 30 days.
And you really wanna target this depending on your store,
what your products are like
and what you think people will keep purchasing.
And this does require a bit of market research
and even just looking at your data and going, okay
people that purchase the second time,
what are they purchasing?
Why are they purchasing that?
Is it for a friend, a family member?
Is it for themselves?
And then you can tailor all the copy in the emails
in the banner ads
and the Facebook ads around that sort of thing.
And the last thing I really wanna recommend is focusing
on building a brand.
And this is something that very few people do in E-commerce.
And it's the big players
the successful ones that have done this well
and it's paid off in spades.
And what do I mean by this?
I mean, think about a brand like Apple.
They have people that would kill for their products.
They have people that would never buy anything else
except Apple, Apple, Apple.
It doesn't matter if Apple puts out some piece of crap
they're still gonna buy it.
You want customers like that
because these are people that are gonna go
out into the world, show everyone your products,
tell everyone about them and even argue on your behalf.
They go to war for your brand
and you don't have to pay them anything.
They're doing it for free.
And this is the dream for an E-commerce store.
But no one's really thinking about this.
I've seen this, in example, in Facebook ads
and you look at the comments section and there'll be
people may be throwing shade
on some sort of product that you're selling
but then there are these loyal customers
and you didn't even tell them anything.
And they come in
and defend you, when you have stuff like that
people are gonna see those customers.
And that adds insane social proof.
And that's where suddenly you have people
that are coming back and buying
but they're also telling other people about your store.
And that's how you build a brand that just grows
and grows and grows.
And you're not relying just on one channel of marketing
or anything like that, but you're building an organism.
That's almost has its own life form
and it kind of just grows on its own.
Okay, and that was a lot of stuff to go over, but I
really hope it helps you understand Customer Lifetime Value,
how to calculate it.
And then some tips on how to improve it.
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I'll get back to as soon as I can until next time guys.
Thanks for watching and bye for now.
(Sam waves)
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