Strategies to increase customer purchase frequency and lifetime value using a CDP

In the relentless pursuit of growth, direct-to-consumer (D2C) businesses often prioritize efforts to acquire new customers over those focused on maximizing the engagement of existing customers.  

While acquiring new customers is important, neglecting existing ones leaves significant value untapped. This article explores how to increase purchase frequency from existing customers… and how the right customer data platform (CDP) can help accelerate those efforts.

Why focus on customer purchase frequency?

There are both immediate and long-term benefits to prioritizing Purchase Frequency. The immediate upside is that it provides a near-term revenue boost by monetizing the customer base you’ve already acquired.

But there is also a longer-term strategic value: a systematic focus on maximizing the purchase frequency of paying customers will increase Customer Lifetime Value (LTV), which is the amount of profit you earn from a customer over their lifetime with your brand.  

This is a critical metric for business growth because the more an average customer is worth to you, the more you can spend on customer acquisition cost (CAC), which allows you to accelerate base growth, further increasing revenue.  This virtuous cycle is known as “The Marketing Flywheel,” and once you put it in motion with reliable repeat purchasing, it can supercharge your business.  

There is even a third benefit: repeat usage drives loyalty, and loyal users can become brand advocates, further growing your customer base through word-of-mouth, referrals, and testimonials. (Think of it as a bonus driver of growth!)

To capture these benefits, several proven approaches will grow your customer engagement in no time.‍

1. Establish the right segmentation strategy

The drive to increase revenue will inevitably start with a few email “blasts” to all customers with exciting news about new releases or a special offer (or both).  And that will provide an initial pop in revenue that can quickly become addictive for the business.  

However, mass emails that don’t consider individual interests or engagement levels will eventually burn out the base, causing disengagement with the brand and a decline in revenue.

To prevent this and maximize the revenue potential of each and every customer, you’ll want to establish a segmentation strategy that groups customers by purchase behavior.  This will empower you to develop different programs for each segment, from those least engaged with your brand to those most engaged.

There are a couple of different approaches here, depending on the richness of your datasets and your appetite for customer clustering.

RFM analysis (the robust version)

 The first approach is tried and true but is also complex.  Called the RFM Model, it scores customers (usually 1 through 5) on each of three dimensions.

1.  Recency: how long ago they last purchased with your brand
2. Frequency: how many times they have purchased with your brand
3. Monetary: how much they’ve spent per order 

By crunching a data set of purchase history through a scoring model, you assign each customer a score, and the score maps them to a resulting cluster.  Typically something like this:

• Score 0–1: At Risk
• Score 1–2: Low Performance
• Score 2–3: Average Performance
• Score 3–4: High Performance
• Score 4–5: Top Customer
  

The results can provide powerful granularity, which is often why companies with the resources rely on this segmentation.  But it also requires a bit of upfront modeling, whether done internally or with the support of a CDP with modeling capabilities.

Habituation buckets: A simplified version of RFM analysis

Even if you aren’t ready for RFM modeling, there is a leaner version that is a valuable first step and drives strong results on its own.  Here, you group users into “Habituation Buckets” based on their purchase history for the last six months. 

All users who have placed one order will be “samplers,” those with two orders will be “activated,” and those with three or more orders will be “loyal.”  You’ll also have buckets for your traditional “prospect” segment of users who have NEVER purchased, and “lapsed” for folks who have purchased at least once in their lifetime, but not in the last six months. 

The time window can be adjusted based on the specifics of the products you sell, but in general, a six-month time horizon should work for most businesses. The overall schema looks like this:

• Prospects: Have never purchased
• Samplers: 1 purchase in the last six months
• Activated: 2 purchases in the last six months
• Loyal: 3+ purchases in the last six months
• Lapsed: At least 1 purchase lifetime, but none in the last six months

This simplified approach allows you to create different objectives for each user group based on their level of brand engagement, with the goal being to step them up the “Engagement Ladder,” from least engaged (prospects and samplers) to most (loyal).

2. Customize the user experience for each segment to drive repeat purchases

Armed with your key segments, you can design and implement different communications programs for each segment. They’ll have different objectives and cadences allow you to deploy different offers as needed.

For example, “samplers” have shown interest in your products or platform but haven’t yet committed to ongoing engagement.  You’ll want to leverage their first purchase to upsell related products (more on that in a bit) and deploy your richer offers to trigger repeat purchasing. 

On their second order, they’ll join the “activated” pool. This is where you’ll want to expand your relevant offerings and drive habituation. Treat these folks like they are insiders, with special “early-bird” purchase windows for new releases and special sales, signaling that there are perks for repeat purchasing.  

Because you know they’re willing to pay for your product, you can introduce value bundles of products (such as running shorts and moisture-wicking shirts if they’ve bought running shoes), increasing purchase frequency and average order value (AOV).    

Once they’ve hit their third order, they become “loyal” users. This is when you’ll want to make them feel like VIPs. Deploy surprise-and-delight opportunities like a free bonus item with their next order, or a special “loyal” user coupon for 15% off their next purchase.  Making them feel special will keep them coming back. 

Of course, these elements can be institutionalized with an official loyalty program. There are multiple approaches here, from points for every dollar spent to tiers of benefits that are unlocked when customers reach special spending thresholds.

However, as shown above, you don’t need a full-blown loyalty program to begin reaping the benefits of the basic rewards ideas. The ad-hoc approach is often a good place to start, providing testing and learnings that will inform what kind of loyalty program you’d eventually like to build. 

It’s worth noting that while the segmentation outlined above is more complex than a simple blast communications approach, once you set up the basic logic in your CDP, your customers will dynamically shift into different segments and programs as they move up (and, yes, sometimes down) the engagement ladder.

3. Create “always on” marketing with trigger communications 

While the primary objective of the programs discussed is to drive and habituate repeat purchasing, they will also create activity, such as browsing product detail pages, that doesn’t drive immediate purchases but can be used as “secondary signals” to automatically trigger follow-up communications.  

Two best practices (because they work!) are emails for Abandoned Cart — triggered when items are added to the cart but not purchased — and  Abandoned Browse, featuring items that are browsed but not purchased. 

A pro tip here is to remember that even though they are automated, these emails don’t need to read and look like they are system-generated.  Have fun with the design and copy so that the dynamic images and product details feel like they are integrated into the overall email.  

And, be sure to let the personality of your brand shine through, whether it be irreverent, high-end or folksy!

The same sort of triggers can also be used to launch a multiple touchpoint conversion series.  These work particularly well at the category level when there are multiple products the user might be interested in. For example, if you are a sporting goods site, browsing golf clubs two or more times might trigger a three-email series with multiple types of golf equipment, and a “how to choose” guide to help with selection.

"Automated emails don’t need to read and look like they are system-generated. Have fun with the design and let the personality of your brand shine through!"

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When considering repeat purchasing, an incredibly valuable triggered communication is the customer satisfaction follow-up. These are communications — usually email but may also be SMS — that are triggered a couple of days after the order has been delivered, asking if the product met expectations.  

Whether on a scale of 1-4, 1-5, or simply thumbs up / thumbs down, these are critical communications, especially for a customer’s first order. The surest way to lose a repeat customer is for the first order to be a bad experience. So make sure to have these emails set up and automate follow-up actions through your CDP.

Negative ratings should trigger outreach from Customer Care to make things right, and positive ratings can trigger an email with related items and a special discount (a powerful way to capture that second order with context and relevance.)

4. Activate all channels to meet your purchasers where they are

One of the greatest benefits of a well-instrumented CDP is that it puts all channels at your disposal: email, SMS, app notification, paid media… even direct mail.  You can leverage these channels in different ways for different segments and programs.

While email remains a solid driver of communications and engagement, SMS is a particularly powerful tool for purchasers (from samplers through loyal stages) because those customers have an established relationship with your brand. 

Craft the copy so it feels like it’s coming from a human being rather than a backend system.  This brings the more personalized nature of the channel to life.  The sense of immediacy works particularly well for new arrivals and back-in-stock notifications.

Similarly, personalized product recommendations are well-suited for push notifications.  With a properly implemented recommendations dataset, your CDP can dynamically trigger the right individual product for each user, and the notification can link them right to the product detail page within your App, capturing an impulse purchase with just a couple of clicks.

"SMS is a particularly powerful tool for purchasers (from samplers through loyal stages) because those customers have an established relationship with your brand."

Even paid channels such as Facebook, Instagram, and Google Shopping can play a role, with “remarketing” of offers and products proving effective for higher-value customers in the Activated and Loyal segments.  You’ll want to set these up as A/B tests to validate the ROI, as these impressions carry a higher cost, but the results can have a strong impact on driving habituation and repeat purchasing.

5. Weave personal recommendations throughout the user experience

Too often, personalized recommendations are relegated to, “We thought you’d like” emails or the “Recommended for You” section of the website. Instead, consider ways to repurpose recommendations in multiple areas.  

Site-wide sale emails can highlight personal recommendations with the reduced prices and subsequent savings noted, making the sale immediately relevant to each user.  Similarly, Purchase and Shipment confirmation emails can include complimentary recommendations (aka cross-sell) based on the initial purchase.

"If you’ve given your customers the ability to maintain a Wish List (a valuable capability too often neglected these days), don’t forget to use those as recommendations as well. The customer is literally telling you the items they’d like to buy."

Don’t have a way to create a Recommendations dataset in-house? Just reach out to your CDP or CRM provider. The best-of-breed solutions will likely be able to generate recommendations for you with the proper data set-up.

And here’s another tip: If you’ve given your customers the ability to maintain a Wish List (a valuable capability too often neglected these days), don’t forget to use those as recommendations as well. The customer is literally telling you the items they’d like to buy!

Want to make these recommendations really sing? Highlight the items on your customer’s Wish List that are most highly rated by other customers (and include the star rating.) This is all possible with well-integrated data.

6. Leave no customer behind

It’s a truism of marketing that some of your customers (even some of your best customers) will go several months without purchasing and will fall into the Lapsed customer segment.  

But that doesn’t mean they should be written off.  In fact, they often provide your best revenue opportunity because they’ve had a breather and likely have new needs your products or platform can fulfill. 

This is where purchase history again comes to the rescue, as you can use it to highlight new products in the categories your Lapsed customer previously purchased. Want to make them feel appreciated? Include a special “loyalty” discount. It is often worth investing in a deeper-than-normal discount here, as you’ll be reactivating a proven paying customer.  

If you have a newsletter or new releases email, create a dynamic module to reinforce the “loyalty” discount to the Lapsed customer segment, extending its reach. And don’t be afraid to get personal with a simulated outreach from your Customer Care team: a simple text-based email (often called “memo-style”) will often connect with people when other more produced communications won’t.

The bottom line on increasing the top line

Increasing purchase frequency is a pivotal strategy for driving sustained growth in any direct-to-consumer business. By focusing on existing customers — the customers that you’ve already spent marketing dollars to acquire — you can tap into immediate revenue opportunities and enhance long-term profitability through improved Customer Lifetime Value. 

Ultimately, the key to success lies in recognizing and maximizing the value of every customer interaction, ensuring that no opportunity for increased engagement and loyalty is left untapped.

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