What is customer value optimization?

E-commerce companies that are growing rapidly are the ones that know that simply focusing on retention is not enough and that customer value optimization is necessary.

In this article, you will read about customer value optimization, also known as customer value optimization (CVO). Additionally, we will explain why it is important for your webshop and the difference between CRO and CVO.
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What is Customer Value Optimization (CVO)?

CVO stands for customer value optimization. Its goal is to increase the number of repeat customers so that you achieve sustainable and exponential growth in the long term. It is a process designed to create an excellent customer journey and maximize the ROI of all marketing activities.

Customer value optimization focuses not only on increasing loyalty, the frequency of purchases, and the value of their orders but also on delivering a great customer experience. This ensures long-term e-commerce growth. So, by improving the value for the customer, you also enhance the value of your customers.

“By improving the value for your customers, you also improve the value of your customers.”
— Omar Lovert, Owner of Polaris Growth
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What is Customer Value Optimization Not?

Customer value optimization (or customer lifetime value optimization) is often seen as merely improving retention. Retention certainly plays a role in this framework, but equating CVO with improving retention is a misconception.

Another common misconception is that the goal of customer value optimization primarily revolves around increasing the (monetary) value of a customer. This focus is mainly on adding more products, lead magnets, and other “upsells” solely to get people to buy more. We see it differently and view an increased (monetary) value as the result of CVO efforts. We delve into (the best) customers, RFM models, and qualitative insights, all to enhance the customer experience and be more relevant, resulting in increased customer value.

Ultimately, customer value optimization (CVO) is a framework (and methodology) through which you increase the value of your customers throughout the customer journey by providing them with a better experience.

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Read about how we increase the growth of e-commerce brands with a holistic approach.

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Why Customer Value Optimization (CVO) is Crucial for Your Business

You’ve just read that customer value optimization is important for e-commerce brands to grow sustainably. Here are 10 more reasons that make CVO important for your brand:
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• Focus on What Works. It gives you a way to work more effectively on paid acquisition through better ads, better targeting, and a clearer understanding of how much you can spend on your best customers. This is essential, given that marketing costs have been rising for years and competition continues to increase.
• Make the Right Decisions. CVO gives you better insights into your data, enabling you to make better decisions rather than relying on gut feelings.
• Accelerate Your Growth. CVO helps accelerate the focus on a customer-centric approach and aids in developing a better strategy to improve customer retention.
• Reach the Right Audience. It provides insights into who the most valuable customers/customer segments are for your business and why.
• Save Time in the Customer Journey. By making better distinctions among different customer segments, it helps set up better customer journeys for both new and existing customers, preventing losses.
• Discover What Holds People Back. It helps you better understand the desires, doubts, considerations, and reasons for purchasing of (the best) customers. With these insights, you can communicate much more effectively with your customers, from advertisements to emails.
• Understand Your Offering. It provides insights into which products are best for your business and which products yield the best customers.
• Learn from Your Audience. It offers insights into how to achieve better interactions, increased customer loyalty, and better Customer Lifetime Value.
• Grow Now and Later. Applying CVO is a way to achieve sustainable growth.
• Build Towards Your End Goal. Ultimately, it provides customers with a better experience.
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Impact of Customer Value Optimization (CVO) on E-commerce

Does CVO impact e-commerce? The short answer is yes. CVO, or customer value optimization, is important for brands striving for long-term success. Customer value optimization enables online brands to differentiate themselves from the competition by providing customers with a unique and personalized experience. By focusing on optimizing the customer journey, you not only stay ahead of the competition but also improve relationships and satisfaction. Every customer interaction counts, and CVO ensures a distinctive and valuable experience for each customer.
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From Conversion Rate Optimization (CRO) to Customer Value Optimization (CVO)

Comparison between CRO and CVO
Conversion Rate Optimization (CRO) focuses on optimizing your website. This is done by identifying issues within the (website) funnel, figuring out why they occur (through heatmaps, session recordings, or user research), and then improving these with A/B testing. Most CRO marketing agencies and specialists primarily focus on improving the website. Some marketing agencies, including Polaris Growth, delve deeper into research to also highlight the steps before and after.

At its core, the focus of CRO is to increase the conversion rate (the percentage of your visitors who achieve the primary goal on the site). In the hands of the wrong or inexperienced marketing agencies, focusing solely on CR can have disastrous consequences. For example, halving prices can greatly improve the conversion rate but lead to much less profit and is often not a sustainable solution.

CRO can yield excellent results, but it often addresses only one (important) part of the customer journey. Polaris Growth helps various clients further optimize their websites. For companies looking to optimize the entire customer journey and focus on their best customers, Customer Value Optimization (CVO) is the ideal next step.

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The Transition from CRO to a Holistic Approach to Growth (CVO)

There are numerous ways to tackle growth. As mentioned above, customer value optimization (CVO) is often seen as solely increasing retention. This is understandable since you are working on increasing Customer Lifetime Value (CLV). The principle is: the more often someone returns to make a purchase (retention), the better the CLV becomes.

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We have written an article on increasing retention that shows that a 5% increase in your retention can mean a 25% to 95% increase in your profit. So, it’s not surprising that this is connected. Besides retention, there are many other approaches to achieve growth.

If your company has not yet focused on customer retention, this is an excellent starting point to achieve profitability. However, if you are already working on retention, Customer Value Optimization (CVO) can help you determine which target groups are most valuable to you. CVO goes beyond CRO by looking at not just one component but the entire customer journey—from the very first interaction to the last.

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Do you have any questions after reading this article about what customer value optimization can mean for your brand? Contact Polaris Growth for more advice.