How Fraud Effects on Your Customer Lifetime Value
In the fast-paced realm of e-commerce, where competition is fierce and customer acquisition costs are on the rise, maintaining a high Customer Lifetime Value (LTV) is paramount for sustained success. However, the increasing threats of fraud and chargebacks pose significant challenges to this critical metric, potentially affecting profitability.profitability and customer relationships.
Understanding the Impact:
Fraudulent activities and false declines not only inflict immediate revenue losses but also impact on customer trust and satisfaction, reducing their Lifetime Value to the business(quite oftens the first transaction is not profitable , merchants rely on the next purchase, makein the implant of false decliens, even bigger) . False declines, often a byproduct of overly stringent fraud prevention measures, further compound the issue by turning away legitimate customers and curtailing their potential spending over time. This detrimental cycle can result in a range of negative outcomes, from insulting and exhausting customers to significant revenue loss.
The most commeon reasons for declining legitimate customer:
Sometimes you are receiving a orders with different payer name and different shipping or billing address, might be a present that will send to someone else or someone who purchase a gift card to his friend, this order at first might look suspicious since the order details are not match or appears to be in anyway connected to the customer information.
What can be done?
As an eCommerce expert, you can handle this in a few ways, manual monitoring for high-medium risk orders, tracking the customer email engagement as another indicator for checking if the order is legit, requesting a screenshot of the customer’s ID or credit card after payment.
Managing the Risks with FUGU:
In light of these challenges, a proactive approach to fraud preventionis essential. FUGU offers a comprehensive solution tailored to the needs of e-commerce businesses, leveraging advanced algorithms to analyze customer behavior post-checkout. By identifying between legitimate and fraudulent orders, FUGU helps businesses minimize false declines and ensure that genuine customers are not deterred from making purchases. This not only safeguards against immediate revenue losses but also preserves customer trust and loyalty, thereby safeguarding their Lifetime Value to the business.
Conclusion:
In today’s competitive e-commerce landscape, protecting Customer Lifetime Value is crucial for long-term success. By understanding the detrimental impact of fraud and chargebacks on LTV and implementing robust preventive measures such as FUGU, businesses can mitigate risks, preserve customer relationships, and maximize long-term profitability.
Ready to safeguard your business against fraud and optimize payment verification? Contact our team to learn more about how FUGU can help you protect your LTV and drive sustainable growth in an increasingly competitive market.
