Inside the Retention Value Chain: A Blueprint for Scaling Customer LTV

The Retention Value Chain is a system we use with advanced clients to help optimize lifetime value. In our experience, lifetime value is a hard metric to move, and most cohort-based tools make it even harder to really understand.

These tools often focus on automation but ignore the basics. They don’t help set clear targets or create accountability to actually improve performance. It takes more effort, but the Retention Value Chain has proven to be much more effective.

Every store wants to "increase customer lifetime value (LTV)” in Klaviyo.

But what few realize is that LTV is a complex KPI. It consists of many different smaller metrics that all culminate into your customers coming back more often, placing more orders, increasing your LTV and scaling

What few people realize is that LTV is a lagging metric.

It’s the ultimate KPI you’d like to improve. But this lagging metric will only increase once you’ve improved some of the other leading metrics first.

Here’s what happens once you start focusing on improving these smaller leading metrics instead of just focusing on improving your LTV.

• You’ll break down your LTV into smaller bite-size chunks you can actually directly improve.

• This shows you which leading metrics are on track, which aren’t – and which are preventing you from improving your LTV.

• You’ll be able to pinpoint exactly which leading metrics you’ll need to improve and what problems you need to fix specifically to get the results you’ll want.

• Since you’re keeping close track of and improving every leading KPI that directly impacts it, you’ll make increasing your LTV inevitable.

• You’re noticing where you’re off track much earlier, and are able to fix problems and make adjustments much more quickly, so you’ll increase your LTV and revenue much faster.
  

Breaking your LTV down into leading metrics and KPIs shows you the little things you’ll need to do to improve it.

It unlocks a domino-effect in your business. 

Improve each leading metric one-by-one and you’ll make increasing your LTV inevitable.

Step 1: Define your KPIs

Define the KPIs you’ll need to track for your business.

Focus on the KPIs that will directly impact your customer lifetime value.

Start with the ones we’ve outlined above. They’re the ones we use for our clients. And they’re relevant for almost any store in almost any industry.

Step 2: Set your targets

For each KPI, set two targets: 

One target you’ll need to hit to reach your goals. And one target you’ll need to hit to continue to just breakeven or keep your brand on track to pay bills. 

It’s very common to set the wrong targets for these KPIs. Set stretch goals, but don’t be unrealistic. A rule of thumb we use is: “Can we get to this target by the end of the year?”

Step 3: Make someone accountable for every KPI

Probably the most important component of this entire system is to put a single person from your team in charge of every single KPI.

A big problem for many stores at this stage is that the founder or CMO often is solely responsible for coming up with their entire marketing strategy. 

They’re responsible for improving every single KPI. Which is a huge bottleneck and time-suck.

Putting someone in charge for each KPI allows you to delegate some responsibility to your team. But more importantly: it shifts the strategizing to your team members. 

It breaks up your entire marketing strategy into bite-sized chunks that individual team members can monitor and improve.

It makes them responsible for improving it. 

From now on, it’s their KPI. They own it. They’re responsible for updating the numbers each week. And they’re responsible for improving them. You don’t care how they’ll do it. As long as they do it (and it’s ethical).

Our experience is that you’ll be surprised with what ingenious solutions they’ll come up with to achieve that.

If they’re a competent employee that’s all it takes for them to take care of it. From now on, they’ll be thinking: “what can I do to improve this KPI?” And more often than not, they’ll go out and find an effective strategy to do so.

Once it becomes crystal clear to them which KPIs they should improve, they’ll come up with ways to do so. You don’t even need to tell or show them how to do it. Just making them responsible is enough to make magic happen

Trust me on this: this system won’t work well if you don’t set the right targets or assign owners to each KPI.

Step 4: Pulse on these KPIs weekly with your team

Another key part of implementing this entire system correctly is to set a weekly meeting with your team where you pulse on these numbers.

On that weekly call, go over the Retention Value Chain Report with your team.

1. Make sure that everyone who’s responsible for a KPI is on that call. 

2. Pull up the report. 

3. Review every single KPI that’s off track. (You don’t need to waste time focusing on KPIs that are doing well.)

4. Decide on any action items your team needs to take to get these KPIs back on track.

Take a look at your current reporting and weekly meeting schedule.

And adjust it to implement this Value Chain Report in your own business.

You can download our template here.

Pick your KPIs. Set clear targets. Make someone responsible for each. 

Once you’ve set targets and make people accountable for them, magical things start to happen.

You’ll make increasing your Lifetime Value (and scaling your store) inevitable.  

But only if you come back to these KPIs each week and pulse on them with your team.