LTV Strategy at B2C Footwear Brand

While consulting with a footwear brand operating in a B2C space, I put together this deck to help communicate how pivoting to an LTV-based approach to understanding their customers would drive retention.

Mirela Cialai
Marketing Strategy Consultant at Ragnarok Previously TextNow, ZINIO, Brissi

I developed this presentation independently, and once I had a solid foundation, I presented the initial draft to the client for their review and feedback. After presenting the initial version, I incorporated a few adjustments they deemed necessary. Overall, the collaboration was constructive, with an emphasis on open communication.

While both B2C retail and digital subscriptions share the common goal of customer retention, the approaches and challenges differ. B2C retail focuses on creating compelling shopping experiences and brand loyalty, while digital subscriptions center around ongoing value delivery, engagement, and maintaining a seamless user experience. Successful retention strategies in each context require a deep understanding of the unique dynamics and customer behaviors associated with the respective industry.

In a B2C retail setting, customers typically make one-time purchases, and the challenge lies in encouraging repeat purchases. The focus is on creating engaging shopping experiences and building brand loyalty to ensure customers return for future needs. Additionally, retail often experiences seasonal fluctuations, making it crucial to strategize for varying demand throughout the year. Retaining customers during off-peak seasons can be challenging, requiring targeted marketing efforts, competitive pricing, discounts, and loyalty programs to encourage repeat business.

Analyzing customer behavior data, such as purchase frequency and customer lifetime value, revealed patterns suggesting an opportunity to encourage more repeat purchases. As one of the graphs on the fifth slide here indicates, a vast majority of customers only make one purchase, which prompted a closer look at strategies to improve customer retention.

LTV Strategy at B2C Footwear Brand_SLIDE 1

The client had not been utilizing LTV as a key metric to inform their decisions. The four points highlighted on the current slide were identified as areas where the client was facing challenges, and the introduction of LTV was a strategic initiative to address and optimize these specific issues. The integration of LTV into their approach aimed to provide a more comprehensive and forward-looking perspective on customer value, enabling the client to enhance decision-making processes related to customer acquisition, retention, and overall business strategy.

LTV Strategy at B2C Footwear Brand_SLIDE 2

For the purpose of calculating LTV using this formula, slide 7 provides a clearer explanation on how purchase frequency comes into play, where each customer segment (i.e. one-time buyers, 2-time buyers, 3-time buyers, etc.) has a different LTV value.

LTV Strategy at B2C Footwear Brand_SLIDE 3

The decision to segment customers based on the number of orders and to categorize them into spend tiers stems from a strategic analysis aimed at understanding customer behavior. Customers with different numbers of orders may exhibit distinct behavioral patterns. Analyzing these patterns allows for tailored strategies to address the specific needs and motivations of each group, and designing retention strategies that encourage repeat purchases. Regarding the criteria for "Low-Spend" and "High-Spend" tiers, a key criterion for tier classification is the average amount spent per order. The cumulative amount a customer has spent over their lifetime is also a key factor, with customers with higher total spending falling into the "high-spend" category, reflecting a more substantial financial impact on the brand.

Individual customers within the same segment may have unique preferences, tastes, and purchasing motivations. Some may be more inclined to invest in higher-priced items, while others might prefer lower-priced options. Analyzing individual purchasing histories and patterns within the segment can identify outliers or specific behaviors that contribute to the variance in AOV.

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Teams can easily fall into the trap of seeking data that confirms pre-existing beliefs or assumptions. This confirmation bias can lead to decisions based on incomplete or skewed information. So we should regularly challenge assumptions and ensure that decisions are based on a comprehensive understanding of the data. Additionally, data can be misinterpreted when it's not considered in its broader context. Teams may draw conclusions without understanding the external factors influencing the data, so we should always consider contextual factors, such as market trends, seasonality, and external events when interpreting data. A holistic view helps in deriving more accurate insights.

The LTV analysis can help us identify characteristics and behaviors of customers who transition from one-time buyers to repeat purchasers. We can then use this data to tailor acquisition strategies to target similar customer profiles. Additionally, the LTV analysis provides insights into the factors that contribute to customer retention. We can then leverage this knowledge to refine acquisition messaging and positioning.

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