An Icy Hot Understanding of Customer Lifetime Value

The three most important metrics to measure for successful e-commerce store growth are customer acquisition costs, average order value, and customer lifetime value.

Customer lifetime value (CLV) is a key metric that all businesses need to focus on. CLV measures the total amount of money a customer is expected to spend in your business over the course of their lifetime. It is used to help businesses understand the potential of their products and services and make strategic investments in marketing to acquire new customers.

Knowing your customer's lifetime value allows you to better understand the true value of each customer and make decisions based on that information. A great example of this is Icy Hot, a product that started off with a low price point and cost to manufacture but grew to a $20 million dollar business annually. By understanding CLV and the potential of their product, merchants can create a successful business model that will last.

Icy Hot understood their customer lifetime value and made strategic investments in marketing to acquire new customers.

They realized that each customer was worth a lot over their lifetime. Even though they lost 93 cents for acquiring each new customer on their first sale, 1/3 of their newly acquired customers would go on to spend $60 per year. This meant that the lifetime value of each customer was worth hundreds of dollars making it worth the investment in marketing to get new customers.

Although customer acquisition always involves costs, the lifetime value of a customer should be a major focus of your metrics. By understanding CLV and the potential of a product, merchants can create a successful business model that will last.

Despite the success of Icy Hot, it's important to note that product-market fit is also a key factor in achieving success. This includes validating your product concept and understanding your customers better to attract them to your product. Once you have created a product that is worth their while and can meet their needs, you can focus on ensuring your customers are enjoying your product.

By following the example of Icy Hot and understanding their customer lifetime value and the importance of product-market fit, vendors can create a successful business model. With the right strategies, even small businesses can achieve remarkable success.


Credit: Icy Hot's story was shared with me at a meetup put on by Merchant Mastery.

Written by Jake Ruesink.Published on Feb 10, 2023.