How to use Klaviyo preferences to segment and double lifetime value
Customer Lifetime Value is very much dependent on how engaged the customer is.
One of the best ways to increase engagement is to encourage all subscribers to update their preferences. Whether they have purchased yet or not.
Below are some stats from an ecommerce store which actively encourages subscribers to update their preferences.
In this example, we can conclude that customers who have updated preferences…
- are 30% less likely to ‘churn’
- likely to purchase 2-3 times more frequently
- likely to spend more per purchase (currently 9% more)
The net result for this merchant is that customers who have updated their preferences have more than double the Customer Lifetime Value, compared to those who haven’t updated preferences.
What ‘preferences’ should customers update?
This will obviously vary depending on what your are selling. You also need to consider how you anticipate segmenting your customer base.
For example, merchants selling…
- clothing or footwear, might encourage subscribers to select their size, or fit, or perhaps colour preferences
- pet products, might encourage subscribers to select different animals or breeds
- skincare products, might encourage subscribers to select different skin types or skin conditions
- lots of third party brands, might encourage subscribers to select brand preferences, or whether they’re open to recommendations
One preference that all ecommerce merchants should consider is letting subscribers choose how often they wish to receive emails. This can not only reduce unsubscribe rates, but increase open and click rates, therefore improve list reputation.
The possibilities are as varied as the endless variety of ecommerce stores. But one thing is for sure – by segmenting your customer based on preferences, you will increase engagement, lower churn and increase your margins.
How and when should subscribers update preferences?
There are four obvious stages in the customer life cycle where you can try to encourage subscribers to set their preferences.
1. When they sign up
In addition to the mandatory email field, you can add additional fields to Klaviyo sign up forms. But just because you can, doesn’t always mean you should.
Remember, it’s a case of finding the right balance between quality and quantity:
- If you are able to segment from the initial sign up, you can begin sending subscribers more targeted content even with the first Welcome email
- But if you ask too many questions in the sign up process, you might create a psychological barrier and put people off subscribing
Also consider the format of the sign up form. On flyout forms, you’re probably best only asking for an email address. But for a full page embedded subscription form, you can get away with asking more questions or preference settings.
It’s common and natural to ask for a name as part of the sign up process. However, consider for a moment how likely you are to segment your audience based on subscriber names.
Sure, Klaviyo does enable you to segment on (likely) gender, based on subscriber name. But if your product range is not really gender specific, it might be more relevant and valuable to ask something else (refer to the examples above).
So a good place to start is by considering how you plan to segment. Then create a plan for how you will gather preferences.
2. As part of a Welcome series
The purpose of a Welcome email series should be twofold:
- First and foremost, it should be for a prospect to build trust and confidence in the merchant, to the point where they feel comfortable placing their first order.
- Secondly, it is also an opportunity for the merchant to learn more about the specific needs of that customer and to begin segmenting them accordingly.
There are two approaches to how you might encourage subscribers to update their preferences from Welcome emails:
- You can provide a single link or button to update all preferences in one hit
- You can enable subscribers to make specific selections with a click of a button. For example, ‘What kind of pet do you have?’ Subscribers then click ‘Cat’, ‘Dog’, ‘Cat & Dog’, or whatever.
The second method makes it much quicker and easier for subscribers to choose a specific preference. But if you have lots or preference settings, it may take more time in the long run.
3. A reminder in every campaign email
Every campaign email provides two opportunities:
- An opportunity for a subscriber to unsubscribe
- An opportunity for a merchant to strengthen subscriber engagement
Although the primary objective of any campaign email is typically to sell a product, if you cannot achieve this, inviting subscribers to ‘Update their Preferences’ is still a worthwhile goal.
It’s also worth bearing mind that the two most common reasons for people unsubscribing are either because you’re sending them irrelevant information, or you’re just emailing them too often.
The invitation to update preferences should be positioned after the primary call to action and must make clear what’s in it for them.
Two approaches to consider:
- Highlight the benefits. Every campaign email is a perfect time to ask ‘how often is too often‘ to receive an email. By giving subscribers this control, they are less likely to unsubscribe altogether and you’re encouraging them to update all their preferences.
- Offer an added incentive. Perhaps create a coupon code for a $ or % discount if they update their preferences?
A word of caution: the incentive should be a ‘bonus’ rather than the primary reason for updating preferences. It’s more important to communicate how updating preferences means you can provide more relevant content to their specific needs.
4. As a regular, dedicated campaign
It’s a good idea to create segments of those who have and have not updated their preferences.
You will then be able to track key metrics like order Frequency, Recency and AOV and compare Customer Lifetime Value between the two segments (as in the table at the top of this post).
You will also be able to target those who haven’t updated their preferences, with a gentle reminder/incentive.
This can be done on a regular basis in the form of a dedicated campaign email. You will want to decide what is the right cadence for your audience (monthly, quarterly, whatever), without becoming annoying.
Alternatively, you could invest the time to build out a flow to achieve the same result and have it run automatically in the background.
Do you know your Customer Lifetime Values? What preferences do you need updated to support your segmentation strategy? Share your experience in the comments section below.