During COVID-19, rapid growth in ecommerce generated business optimism and increased shareholder value for online merchants. At that difficult time for brick-and-mortar stores, any sign of positive movement in retail was seen as a very good thing. But that heady era of online expansion was unsustainable. Those days are over.
Retailers are now focused on achieving profitable growth by earning more from existing customers rather than focusing solely on acquiring more and more of them. Specifically, the measure of a robust online retail business is now customer lifetime value (CLTV).
CLTV is relationship-based and depends on trust and loyalty, measured by how often your customers return for repeat purchases and by how much they spend over time. Increasing customer lifetime value is the true measure of whether your store is thriving.
The key to increasing CLTV is personalizing customers’ experiences. But today, personalization needs to happen across the entire customer journey, from initially discovering products and deciding to purchase something to (possibly) returning an item post-sale.
In this blog, we’ll define customer lifetime value and explore how to increase CLTV — including by deploying AI-driven solutions like Signifyd’s Commerce Protection Platform to ultimately personalize every step of the purchasing lifecycle. What is CLTV?
How to calculate CLTV
CLTV is the total amount of money a customer spends in your store over the entire time they shop with you. Instead of judging growth on the sheer number of new customers acquired, volume of transactions and the initial revenue they generate, CLTV measures how often individual customers buy, how much they spend and how long they stay customers.
For example, if a customer buys clothes from your online fashion outlet once a month, spends $100 each time and stays a customer for five years, their CLTV would be:
$100 per sale × 12 visits × 5 years = $6,000
Measuring customer lifetime value unlocks retail growth initiatives
It wasn’t always easy to measure the value of initiatives meant to build customer loyalty and thereby increase the value of each customer who returned to an ecommerce site. Retail veteran Antonio Colicchio explains the advantages today of being able to demonstrate the value of a given intiative to executives focused on the return on investment of the latest marketing program.
What makes CLTV a more powerful metric than other common measures? Counting new customers doesn’t tell you the extent to which revenue is increasing — or how those new customers are contributing to profitability or for how long. Conversion rates are certainly great to know, but they measure in-the-moment transactions and not the long-term value of having successfully landed that transaction.
How to increase CLTV? Personalization
Building a higher CLTV involves something of a chain reaction. Increasing a business’ repeat purchase rate is the key to higher CLTV. Repeat purchases grow out of great customer experiences. Great customer experiences grow out of — among other things — the ability to personalize the entire customer journey.
But “personalization” can mean many things in retail. At Signifyd, we talk about it in a very particular way.
When we advise ecommerce merchants to personalize the customer journey, we mean that by understanding the identity and intent of each customer, merchants can minimize the friction at each stage of a shopping journey.
This includes verifying that they are who they say they are, checking that the payment method they offer is valid, and ascertaining the legitimacy of a return or refund request.
Signfyd enables these insights through its Commerce Protection Platform, which is driven by machine learning, fueled by data and built by some very smart Signifyd employees who constantly improve and train the AI models at its core. These three things help us understand both the identity and intent behind each transaction — essential for both curbing fraud, increasing conversion and boosting CLTV.
Purchasing: Create a frictionless purchasing process
Getting a leg up on increasing CLTV starts at the beginning of the customer journey — when customers enter your online store and begin searching for products to buy. All aspects of this first step can be made frictionless by intelligent, learning machines that help retailers personalize the shopping experience in the following ways:
- Find relevant products: Repeat customers can receive personalized recommendations and be served relevant product selections online based on past browsing or purchasing behaviors.
- Add selected products to cart: By deflecting unauthorized resellers running bot-powered raids on hot-selling products, merchants can ensure that desirable items are available on their sites — and that their site performance isn’t slowed by the overload of automated scalping schemes.
- Validate discounts and promotions: Signifyd’s AI algorithms detect coupon abuse without stopping real customers from taking advantage of legitimate discount codes as they fill their electronic carts.
Checkout: Reduce hassles and prevent abandoned carts
Signifyd enhances the checkout experience by making it faster, seamless and frustration-free for legitimate customers while simultaneously blocking fraudsters. Customers who aren’t hassled or put off by unduly complicated checkout processes are more likely to return, thus increasing CLTV.
By using Signifyd, online merchants can:
- Approve purchases faster: Signifyd’s AI-driven commerce protection instantly approves legitimate transactions, avoiding unnecessary — and lengthy — manual reviews that delay the speed at which customers receive orders. Its guarantee on approved orders means merchants don’t have to agonize over whether an order with some anomalies is legitimate once Signifyd has declared the order safe.
- Reduce false declines: Signifyd relies on transactional, behavioral and historical data from thousands of customers globally, meaning legitimate customers aren’t mistakenly flagged as fraudsters. Merchants avoid insulting good customers, which can result in losing their business for good.
- Offer shoppers’ preferred payment methods: Customers can pay with their preferred method — credit card, digital wallet or buy-now-pay-later (BNPL) options — without facing extra security roadblocks.
- Streamline checkout for every customer: Merchants can confidently offer guest checkout and reduce the steps necessary to complete a purchase. Shoppers don’t need to fill out long forms or provide additional identity verification every time they shop.
Returns: Transform negative experiences into retention opportunities
Signifyd improves the returns and refunds experience for customers by eliminating fraud while ensuring a smooth, hassle-free process. That means that an otherwise unpleasant occurrence — being displeased with a purchase — can actually make a customer more loyal when a return and refund are handled quickly and easily.
Here’s how Signifyd helps:
- Accelerate refunds for loyal customers: Relying on data from its Commerce Network of thousands of retailers, Signifyd’s Decision Center can automatically respond to return and refund requests based on the level of risk involved. Merchants can assign specific responses based on risk, ranging from an instant refund for a loyal customer to denying a refund to a customer with a history of return fraud.
- Boost trust in the online retailer to do what’s right: A secure, fair return process gives customers peace of mind, encouraging repeat purchases, long-term loyalty and higher CLTV. In fact, 62% of consumers say they’ll buy more from a merchant based on a good returns experience, according to Signifyd’s 2025 State of Commerce Report.
Rethink the customer journey with Signifyd
The shift from focusing solely on growth at any cost to profitable growth requires reimaging the customer journey and the points along the way that are worthy of personalization — and tracking how that increases CLTV.
A strong commerce protection platform such as Signifyd is critical for battling fraudsters while making the customer journey enjoyable and seamless — through purchasing, payment, checkout and returns. The transformation starts with innovation and technology and is fueled by an AI-driven customer experience that has shoppers coming back for more.
Looking to increase customer lifetime value? Let’s talk.
