Author: Chris Pearson, Partner & Email Marketing Specialist at 3BM
Temporary success is easy to achieve, but building a brand with true longevity requires a different approach.
Rather than pursuing unsustainable growth at any cost, the 0.01% of ecommerce brands that stand the test of time focus on three key metrics that create leverage for scaling.
Many ecommerce brands pursue unsustainable growth by focusing solely on customer acquisition.
They lack a rigorous focus on three vital metrics that create leverage for scaling profitably over the long-term.
What happens when brands ignore these key metrics?
Their chances of staying open, helping customers, and thriving drops significantly.
Here’s how to build a brand that lasts:
Customer Lifetime Value: The Key to Sustainable Growth
Many brands focus solely on customer acquisition without considering long-term value.
This leads to overspending on marketing and poor retention.
Savvy brands calculate Customer Lifetime Value (CLV) to shift focus to nurturing lasting relationships beyond the initial purchase.
Strategies like loyalty programs, personalized communication, and excellent service increase CLV by improving retention rates and order frequency.
The higher the CLV, the more revenue each customer generates over time.
Higher CLV also enables greater spending on acquisition, fueling growth.
Neglecting CLV means missing repeat business opportunities and unsustainable growth.
Brands that don’t calculate Customer Lifetime Value only see the revenue from each customer’s initial purchase.
This encourages overspending on marketing to acquire one-time buyers.
Meanwhile, they miss opportunities to maximize repeat purchases through retention strategies.
Average Order Value: Maximizing Revenue from Existing Customers
Increasing Average Order Value (AOV) is another leverage point, encouraging customers to spend more per transaction.
Upselling, cross-selling, offering premium items, raising free shipping thresholds, and optimizing the shopping experience boosts AOV.
With higher AOV, brands earn more revenue without proportionally increasing marketing costs.
Brands that ignore AOV leave potential revenue on the table from their existing customer base.
Brands that don’t optimize Average Order Value miss chances to earn more revenue from existing traffic and customers.
Failure to upsell, cross-sell or offer bundled packages results in lost sales.
Low AOV brands leave money on the table by not incentivizing higher spending. In contrast, those who boost AOV enjoy:
- Increased revenue without raising marketing costs
- Higher order values from offering premium products
- More sales by optimizing the shopping experience
- Higher cart values by encouraging bundling and upsells
Customer Acquisition Cost: The Key to Profitability
Profitable growth requires healthy margins between Customer Acquisition Costs (CAC) and the value derived from customers.
When CAC is too high, customer acquisition erodes profitability.
Leading brands constantly optimize their marketing efficiency to lower CAC and improve margins.
This allows for profitable reinvestment into further growth and innovation. A razor sharp focus on CAC margin is crucial, as many paid advertising platforms encourage a narrow focus on ROAS.
When brands don’t track CAC, they may be acquiring customers at a loss.
Bloated CAC erodes profit margins over time and restrains growth.
These brands overspend on marketing without ensuring positive return on investment.
However, brands who optimize CAC and focus on efficiency reap benefits like:
- Increased profit margins on acquiring each customer
- Ability to reinvest profits into growth at scale
- Sustainable growth trajectory without feast and famine cycles
- Competitive advantage to acquire customers more profitably
Takeaways
For ecommerce brands seeking to stand the test of time, sustainable scaling trumps rapid short-term growth.
By optimizing Customer Lifetime Value, Average Order Value and Customer Acquisition Cost margins, brands find leverage for growth that outlasts 99.9% of competition.
This focus on longevity over temporary wins is the key to building an iconic brand.