4 KPIs For Operations Managers to Track Impact on Customer Lifetime Value

Every person employed by a retail brand—especially the operations manager and team—should be laser-focused on improving customer lifetime value (CLTV), since repeat customers are unquestionably fruitful for retail businesses. For example, an impressive 35% of an e-commerce store’s revenue is created by a mere 5% of its customers. 

However, many supply chain teams don’t understand the impact they have on the customer experience and, ultimately, the company’s revenue and growth goals. In fact, the post-purchase experience is directly correlated to the lifetime value of a customer: 76% of shoppers said that an unacceptable delivery experience would strongly or somewhat affect their decision to order from that company again. 

Which KPIs measure operational impact on lifetime value? 

In order to prove impact, you need to make sure you’re tracking the right metrics. Make sure that the goals you choose are:  

• Within your team’s responsibility and scope. You want to make sure your team has the agency to make changes and improvements that ultimately impact these KPIs. 
• Influential on the customer’s post-purchase experience. There are plenty of relevant operational KPIs to track, but for this purpose, you want to make sure these activities affect the overall customer lifetime value. 
• Challenging, yet achievable. You want to set lofty goals for your team, but also motivate them by having the ability to effectively reach them. 

Here are 4 KPI examples that operations managers can track to showcase their team’s impact on the customer experience. 

Operational KPI example #1: OTIF (On-time, In-full) 

On-time delivery is critical in building brand loyalty. For example, 30% of consumers would not repurchase if an item arrives late. 

OTIF is the gold standard for measuring a fulfillment program’s success. It stands for on-time, in full, meaning the percentage of orders where every product was delivered on time. Of course, 100% is an ideal OTIF percentage, but a more realistic goal is between 80 - 100. 

Many factors can contribute to a low or high OTIF, including inventory availability, order volume fluctuations, SKU count, associate expertise level, etc. As the team lead, you’ll be keenly aware of what is a realistic OTIF to track, given the nuances of your supply chain. 

OTIF is a great KPI for operational teams, since the team can (mostly!) control whether they hit this objective. Another useful measurement to track, although the team has less control over the results, is carrier performance versus expectations to understand how often carriers are meeting the estimations they provided. 

Operational KPI example #2: Shipping Cost as a Percentage of Average Order Value (AOV) 

The cost of shipping is a key influence on the consumer experience. For example, 48% of shoppers abandoned their cart because the extra costs (including shipping) were too high. In order for brands to be able to offer affordable shipping to their customers, they need to pay affordable shipping rates themselves. 

In our 2023 E-commerce Benchmarks Report, we found that most industries have shipping costs at 10% or less of AOV.

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Also, consider total fulfillment spend as a percentage of AOV. Track all fulfillment-related spend—including labor, storage, pick and pack, parcel fees, etc.—and divide that by total e-commerce revenue. One estimate lists total fulfillment spend at 20% of AOV. 

Operational KPI example #3: Number of WISMO Queries 

Consumers demand clear communication and transparency throughout the post-purchase process. For example, more than 80% of respondents expect to receive regular updates about the status of their products, from the time the order is placed until it arrives in their hands. This includes notifications for purchase confirmation, initial shipment notification, and final delivery. 

A great way to measure the success of order and delivery notifications is by tracking the number of WISMO queries. Measure the number of support tickets your brand receives asking about delivery and shipment status. The goal is for this number to decrease with the introduction of package tracking notifications since customers have the information they need at the click of a button. 

Operational KPI example #4: CLTV For Customers That Have Placed At Least 1 Return

A whopping 97% of consumers would be more likely to purchase an item in the future from a company that provided them with a positive return experience in the past. Returns are a valuable part of the customer journey and need to be set up properly to satisfy customers. 

Consider tracking the CLTV for all customers that previously returned an item, and compare it to your baseline CLTV. This is useful in understanding whether the returns experience fosters customer loyalty or customer loss. 

You may also be experimenting with your return fees, given that 81% of retailers started charging for at least one return method last year. Use CLTV or a similar metric to understand the impact return fees have on your customer’s lifetime spend. 

How to improve your operational KPI results 

Once you understand the KPIs that you want to measure, it’s time to dive into how you can improve each metric. For this, you’ll want to download our “Operator’s Guide to E-commerce Loyalty: A Post-purchase Playbook” for detailed, step-by-step instructions for creating a best-in-class operational program that provides an exceptional customer experience. 

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Like the old adage by Peter Drucker, “You can’t improve what you don’t measure.” By identifying the important KPIs for your operations team, you can identify your impact on the customer experience, improve any weaknesses, and prove the value of a world-class operations team. 

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