When a customer uses your products or services, it can be the start of a long-term relationship that is beneficial to both parties. Customer lifetime value (CLV) estimates the long-term value and revenue a customer will contribute to a business over the course of the business relationship. 

Loyal customers become brand ambassadors for your business, and will continue to use your product or service as long as you continue to meet or exceed their expectations. 

One of the ways you can increase your CLV is by using SMS (short message service) retention marketing, to communicate with your customers via text and encourage them to buy again.. 

Why SMS?

A strong SMS strategy an essential part of your retention marketing toolbox:

• According to Statista.com, there were 294.15 million smartphone users in the U.S in 2020, and that number is expected to reach 311.53 million by 2025. That represents a very large reach with SMS.
• The UN found global e-commerce has reached $26.7 trillion since COVID-19 shut down the world. SMS marketing can facilitate ecommerce in new ways.
• People average just under three hours a day on their phones, and 69% admit to checking their phones within five minutes of waking. Read: It’s a channel people are on – a lot. For many people, cell phones are their main telephone, so if they have entrusted you with their personal phone number, they want to hear from you, so take advantage of it. 
• SMS messages generally cost about $.01 to send, while MMS (multimedia messaging) with videos and other embellishments cost about $.03. You can read more about the differences between SMS and MMS here. 
• A study from Zipwhip found when a business provided the communication channel the consumer wanted, they made more purchases from the business (40%), recommended the business to a friend or family member (40%), filled out a satisfaction survey (38%) and left a positive review (30%).

How SMS Marketing Can Increase CLV

Reaching your customers where they spend time is one of the keys to any successful marketing, so integrating SMS into your retention marketing plan makes good sense. 

Here are a handful of ways that SMS marketing can increase CLV:

SMS Has a High Engagement and Conversion Rate 

Research by Twilio shows 62% of consumers want to communicate with businesses via messaging, and 39% of consumers said they prefer SMS/MMS.  

On average, 81% percent of Americans text at least weekly and open those texts within three minutes of receipt. 

Our research at Radiance Commerce has found click-through-rates for SMS messaging averages 10% and 30% (depending on vertical, use-case and promotion type). In contrast, email marketing response rates average only 6%. 

SMS Enables Personalized Experiences

When you combine SMS outreach with machine learning, ecommerce magic can happen. You can track consumer behavior, and search results or past purchases across a variety of data sources, including online and in bricks-and-mortar stores. 

This enables a comprehensive customer profile, where you can recommend product add-ons, upsells, complementary products or accessories, and other personalized recommendations. 

You could also compare and contrast similar shopping experiences from other customers to build a more robust profile. For example, people who bought X typically searched for A or B, or bought C with it. 

With the right platform, SMS can combine all that information into targeted, personalized SMS messages. SMS is also perfect for sending shipping and tracking information, appointment confirmations and reminders, and other straightforward information. 

While that customer is receiving a personalized reminder, so are other customers, because bots can be scaled and perform multiple tasks simultaneously while gathering data about click-through rates, response, which messaging was most successful, and what the opt-out rate was. 

Plus, you can get reports in real time, and use machine learning to improve engagement and personalization.  

SMS Facilitates Multiple Purchases Over Time

By enabling conversational commerce, SMS boosts CLV, and helps turn one time customers into repeat buyers.

Conversational commerce allows you to have two-way conversations with your target audience, and enables commerce and customer support all via SMS through chatbots or live agents.  

Here are some ways you can turn a one-time purchase into a repeat customer: 

• Offer VIP discounts, promotions or special offers for new subscribers.
• Ensure that every SMS message is specific to the recipient. Using data such as purchase and search history, geographic location and other demographics can ensure you target the right message to the right customer. 
• Recommend product add-ons, upsells, complementary products or accessories, and other personalized recommendations. 
• Remind customers if a product is going on sale, that send renewal reminders or service reminders and/or make complementary product suggestions. 
• Send birthday greetings, special VIP discounts and track results of the promotion regardless of the location. The right platform can then churn all that data to make better recommendations in the future. 

A satisfied customer is a loyal customer, and that increases CLV. 

SMS Assists with Cart Abandonment

The Baynard Institute found the average cart abandonment rate is approximately 69%. Reasons for abandonment include unexpected shipping costs, price comparison or the need to create an account to complete the purchase. 

What’s more, the average cart abandonment rate by mobile device is about 81%. Considering that mobile commerce sales were projected to hit $3.56 trillion by the end of 2021, that’s a large chunk of potential sales left in a cart. 

However, a timely SMS nudge about an abandoned cart resulted in a 36% clickthrough rate, and a 4.5% cart conversion. In contrast, email reminders had a 3.2% clickthrough. 

SMS Offers Customer Support

Customers often have questions before making a purchase decision, and can be one of the reasons for cart abandonment. If a customer has to stop and research sizes or shipping options, they are more likely to abandon the purchase. 

Enter conversational checkout, which allows consumers to purchase goods within messaging channels like SMS or Facebook Messenger without ever having to leave the app. Remember that the cart abandonment rate on mobile devices is about 81%, so if you can make the process seamless, you are more likely to convert the sale.

Another advantage of conversational checkout is speed. If a customer already has payment information saved with your business, a purchase could be completed by responding to an SMS marketing message. 

Radiance Commerce technology can integrate a payment vault inside the ecommerce platform or create a saved payment vault outside of the ecommerce platform, using integrations with payment gateways like Stripe or Braintree. 

And finally, incorporating a chatbot into your conversational checkout process allows customers to ask about shipping costs, whether a product is in stock, ask other questions and research alternatives all within the messaging channel. 

Customers who can get all the answers they need are more likely to commit to purchase. 

To learn more about best practices for designing the conversational checkout experience, check out: 5 Best Practices for Conversational Checkout.

Final Thoughts

Smart devices are now commonplace, and even basic cellular plans include text messaging. People respond quickly to SMS messages, and it can be a smart marketing tool to engage with your customers and build loyalty. 

SMS, when implemented strategically with conversational checkout, can build customer lifetime value and increase your bottom line.