An Overview of CLTV
CLTV or CLV (Customer Lifetime Value) is a metric through which businesses can measure the revenue a customer would yield in the long run. The longer the customer’s lifespan, the more profitable the business will be. It is directly related to customer retention.
Businesses mostly use two models to calculate the CLV.
1. Historical CLV that considers past data and offers information about the value of customers according to the past interactions.
It is suitable for customers exhibiting consistent brand interactions throughout their lifecycle.
2. Predictive CLV that records the customer’s purchasing behavior to predict their future interactions.
It helps brands enhance their customer acquisition-activation-retention process.
Why is CLTV an Important Metric For Businesses, Including Fragrance Brands?
Did you know?
After buying from your online store for the first time, a customer has a 27% chance of purchasing again. There’s a 49% chance of reordering after a second purchase. After a third purchase, this figure increases to 62%. (Source: Smile.io)
Dimension Data has revealed that some 84% of companies that work to improve customer experience observe an increase in revenue. According to BIA Advisory Services, customer retention is vital for the 61% of small businesses that say more than half their revenue comes from repeat customers. If we talk about the beauty and cosmetics industry, customers spend 30% more per order after shopping with a company for six months and 45% more after 36 months. More than 39% of customers are open to spending more with a brand they are loyal to, in spite of cheaper options. In retrospection, 69% of C-suite executives reported increasing investment in customer loyalty programs, between 2017 and 2019.
These figures, I’m pretty sure, have piqued your curiosity and made you realize how important it is to get repeat orders. And if you are in the fragrance industry, it becomes even more important to retain your customers.
Let me tell you why!
Importance of Customer Retention in Fragrance Industry
Take a look at this chart showing the average number of sprays in a perfume bottle.
Note: These are approximate figures calculated through plain arithmetic without considering evaporation and other external factors.
This means that if a customer has purchased a 10 ml perfume bottle, it would last for approximately 3 months. This means that they would need another bottle soon after.
The CLV for a fragrance customer can be estimated at around USD 200, considering the average life of a D2C fragrance customer.
Now, imagine what you are losing out on, because of a low CLTV.
Scary, right?
So, let me share some effective tips that will help you improve your CLTV and keep maximum customers hooked to your brand.
8 Tips to Improve Your Fragrance Brand CLV
For ease of understanding, I have divided the CLV improvement methods into two titles: Technical and Non-technical.
First of all, we shall go through the 5 technical methods to improve customer retention.
1. Investing in Creating Omnichannel (and Personalized) Experiences
Time and again, you must have read: Put the customer first and at the center of your marketing strategy. I am going to reiterate the same point. Provide an omnichannel customer experience —- an experience that’s consistent across different channels and touchpoints.
The objective is to let the prospects or customers move across different channels easily and drive maximum conversions. Personalize every step of the customer journey once they have purchased from you. Send out regular emails to keep in touch with the customers. Share information about new product launches, promotional offers, and any other updates that would appeal to the customer.
It would not be possible to achieve repeat purchases without investing in cart recovery programs and re-engagement campaigns. Remind the customers in case they have an unattended product in their cart. Or if a customer is dormant for a long time, say 3 months or 6 months, let them know that you miss them. Incentivize them with attractive discounts to compel them to purchase again. You can also re-engage with the inactive customers to inform them about any recent updates to your policy. It is a great excuse to get in touch with them.
Keep in mind that implementing such strategies alone won’t be enough; you will have to track the analytics too. Monitor the click-through rates of your campaigns, conversion rate and overall engagement to understand what resonates the most with your audience. Keep optimizing your campaigns according to these results.
2. Subscription Services
Offer the option to subscribe to the fragrance products and set a discounted price for all the subscription products. It will give you a steady stream of revenue by ensuring repeat orders. As customers get attractive deals on their favorite products, they are more likely to continue shopping from you. Along with subscriptions, you can even offer upgrades and increase revenue opportunities from existing customers. With a predictable revenue stream, it is easier to maintain and improve your core offerings. In addition to better cash flow management, the subscription model lets you manage inventory more effectively.
Our experts can help you integrate the “Subscribe to a Product” feature in your fragrance store by employing the respective extension. We have Adobe Commerce certified experts who specialize in creating most memorable digital experiences for your fragrance customers.
3. Loyalty Programs and Referral Rewards
On average, customers in loyalty programs have a 15-40% higher LTV than the average customer. Customers with an emotional relationship with a brand have a 306% higher CLV, with 71% of them recommending the brand to others. It is significantly higher than the average rate of 45%. Launch loyalty programs for your perfumes and other fragrance products and give away free samples, referral rewards, and exclusive gifts to the loyal customers. For example: Sephora’s Beauty Insider Program offers customers opportunities to save, get product samples, and tickets to exclusive events. Every brand interaction gives them a chance to win attractive rewards.Their tier-based program has brought them over 25 million loyal customers.
Source: https://www.sephora.com/beauty/profile-beautyinsider
You should also add referral programs to your strategy as referred customers have a 16% higher lifetime value and an 18% less churn rate. It will increase your brand exposure and contribute to increasing customer acquisition rate as well as retention.
4. Real-time Tracking Updates
Provide real-time tracking updates through SMS, emails, and in-app notifications or push notifications. This is important because 71% of customers like to do business with eCommerce brands offering real-time shipping information. 75% of customers confessed that lack of tracking options would put off the customers from shopping fragrances from your brand.
Here’s an example of an extension that helps enable order tracking for the customers.
While choosing the logistics partner, make sure that they allow the customers to monitor the order delivery status through live-tracking or SMS and email updates. Go for a logistics partner with robust facilities and infrastructure that can cater to all your distribution, reach, and delivery requirements.
5. Using Robots to Fulfill Orders
AI (Artificial Intelligence) has made its way into all walks of life. In the realms of eCommerce, let AI take care of order fulfillment. 88% of customers have admitted that fast delivery (same-day delivery) is an important deciding factor in their purchasing decisions. Hence, robotic fulfillment is a blessing. Robotic fulfillment streamlines the entire order fulfillment process for your fragrances while maintaining their shelf life and quality. It would allow you to deliver urgent orders on the same day even during the peak season and otherwise. Eventually, it will keep your brand on the top of the customer’s mind and make them choose you over the competitors.
Source: Using Robots to Fulfill Orders
Now, we shall switch to the 3 non-technical methods to improve customer retention.
6. The Option to Gift Wrap the Products
Add a feature of gift wrapping your order to enhance the gifting experience for your customers. Such value-added services will boost customer loyalty and make shopping even more delightful.
7. Customizations to the Order
I cannot emphasize enough the importance of order customizations. It is another value-added service that can uplift the entire unboxing experience. Offer the customers the option to engrave their name or a short message on the perfume packaging. It will make the customers feel special and make the product look even more precious. These gestures enhance customer loyalty and retention rate.
8. Personalized Messaging
Add a personalized note thanking the customers for their orders and inviting them to order again. It is a great way to build authenticity and increase the probability of reorders. It will gratify the customers and make them look forward to ordering again from your brand. Such experiences would also compel them to post about it on social media, thereby enhancing your social media presence and building social commerce for you.
Wrapping Up
To sum it up, I would like to tell you that the global fragrance and perfumes market is expected to touch USD 77.52 billion in 2032. That translates to a huge CAGR and reflects the growing trend of personal care.
Source: us-perfume-market
If you want to tap into the full potential of the fragrance industry, these tips would surely give you an edge over other brands and propel your customer retention initiatives.
And in case you still feel stuck in implementing the technicalities, feel free to reach out to me.
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Digital transformation expert and trusted advisor to global brands. With a career dedicated to navigating tech's evolution, she's led successful initiatives, driving businesses into the ecommerce future. Beyond the boardroom, she finds solace in mountain retreats, cherishing moments of inspiration with a bowl of Maggi. Whether crafting strategies or exploring new heights, Shruti's journey exemplifies innovation, resilience, and a zest for life's adventures.
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