Customer Lifetime Value: A Better Compass to Guide Your Marketing Automation

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With marketing technologies growing ever more powerful, many companies are deploying the latest tools to personalize marketing or make ad spending more efficient. There’s no question that new digital technologies allow marketers to approach customers with surgical precision, unlike the blunter instruments of just five years ago. But the rush to invest in new technologies designed to boost the return on investment (ROI) of a single purchase or channel often misses the foundational goal of knowing who your target customers are, what they’re worth to the firm and how they behave. If a customer has a high potential lifetime value, it’s worth pulling out the spending stops to persuade him or her to make a first purchase with the brand, which, of course, would likely hurt short-term ROI. Without that perspective, companies might waste money acquiring low-value customers or targeting prospects who are unlikely to make a purchase.

Marketers who train their machines, metrics and minds to improve customer lifetime value emphasize enduring customer relationships over immediate channel results or a single transaction’s value. As marketers adopt increasingly powerful artificial intelligence tools—whether for one-to-one or segment marketing—they will want to direct those tools and related ROI metrics to deepening customer relationships.

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Customer Strategy & Marketing

Marketing leaders today do more than acknowledge that customer lifetime value matters

Marketing leaders actually focus their spending and staff resources accordingly. A Bain & Company survey of roughly 500 companies found that marketing leaders exhibit a few characteristics that set them apart from the bottom 25% of companies. The leaders are more likely to embed employees in marketing who specifically focus on understanding the customer's end-to-end experience and align their strategy with customer needs rather than channel needs. They also scrutinize customer lifetime value in addition to more traditional last-touch metrics such as ROI, customer acquisition cost and click-through rate.

Shifting to a customer focus leads to better economics. That financial benefit flows largely from creating more promoters among the customer base—people who spend more with the company, stay longer and generate more referrals.

Marketing leaders break down the challenge of this shift into manageable pieces, and hone skills in three key steps:

  1. Build smart, targeted segmentation based on a customer’s overall value.
  2. Use technology to develop a deeper understanding of customers’ priorities and experience at each step of their relationship with the company.
  3. Make data-informed hypotheses about which technologies to use in order to acquire and retain the customer.

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