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Customer Lifetime Value : The Secret To Boosting Your Revenue

Updated: Feb 15


Are click-through rates, visits, and visitors your usual go-to metrics when measuring customer acquisition campaigns’ performance? Maybe you look a layer deeper to understand conversion rates, net profit margin, and revenue. While these metrics tell you some insightful stories, it doesn’t exactly paint the full picture of your marketing impact – not when you’re trying to learn the value of each customer. That’s where the often-overlooked Customer Lifetime Value (CLV) metric comes into play.


By understanding the ongoing value of each customer to your business, you can make more informed decisions that lead to long-term success.


MAPP CLOUD IMPROVES CUSTOMER LIFETIME VALUE, FORRESTER STUDY SHOWS


In a Total Economic Impact™ (TEI) study on Mapp Cloud that we had commissioned, Forrester found that Mapp Cloud customers saw a 540% ROI over three years.

From several interviews, Forrester highlighted these common challenges our clients had before adopting Mapp Cloud:

  • Missing foundation for understanding customers

  • Limited capabilities to reach and engage customers

  • Lack of bandwidth to scale marketing efforts

Collectively, these facilitated a fragmented customer view, non-personalized and irrelevant marketing communications, fractured marketing reach, and manual processes that limited their ability to be productive. All these combined factors ultimately would result in poor customer experiences.


By adopting Mapp Cloud, our customers saw these quantitative benefits:

  • Increased reach of messaging to over 500K more customers.

  • Improved messaging engagement by 25%

  • Raised conversions on marketing messaging by 20%

  • Greater basket sizes of 10%

  • Marketer productivity increased by 25%

Amongst the several qualitative and quantitative benefits identified, a greater Customer Lifetime Value was also one of the study’s highlights. But before we dive into how to achieve this, let’s uncover what exactly CLV is and the impact it can have on your revenue.


WHAT IS CUSTOMER LIFETIME VALUE?

Customer Lifetime Value (CLV) estimates the total monetary value a customer will bring to a business over their entire relationship with that business. It considers all the purchases a customer makes during their time as a customer, minus the cost of acquiring and retaining them. In other words, CLV represents the amount of money a business can expect to earn from a customer over the course of their relationship.

Every single order between acquiring a new customer and customer churn will count against the CLV.


But what’s the value here in looking beyond the initial purchase and considering the total value of a customer over time? If we refer to the Pareto principle, it states that roughly 80% of consequences come from 20% of causes. In other words, 80% of your revenue is generated by 20% of your customers. But is this true for your customers, or is this simply an assumption?


By using tools to understand your customers and identifying that exact percentage, you can determine where to invest time, budget, and resources best to drive your revenue for the long term to accumulate an effective ROI. Maybe it’s an 80/20 split, or it could be something completely different. And remember, that doesn’t mean that you should forget the other percentage group. Instead, it helps you learn where to optimize your marketing efforts and budgets.


EXAMPLE


You’re a new customer looking for the best camera to support you in your new photography hobby. After interacting with the electronics store’s digital campaigns and conducting research, you’ve purchased your first order: a camera priced at £1500. Over time, you realize that your camera needs additional camera accessories, and you need to make a few more purchases: a memory card for £30, a new lens for £800, and a bag for £350. In total, you’ve spent £1180 on these accessories over that period of time.


When looking at the original campaign’s success that brought you to the electronics store, most metrics would only consider the initial purchase of the camera: £1500. But that doesn’t give full insight into the customer’s activity with your brand. By focusing on the CLV, you can look at the additional purchases made as a result of that initial campaign and calculate the CLV to be £2680.

By looking at the CLV, you can determine the maximum amount you can afford to spend on acquiring a new customer. As you optimize customer acquisition costs and focus on the most profitable customers, you can improve overall profitability and grow the bottom line.


INCREASE YOUR CUSTOMER LIFETIME VALUE IN THREE SIMPLE STEPS


Achieving a greater Customer Lifetime Value stems from a combination of fundamentals that can shift you from plain customer experiences to insight-led marketing customer experiences. But where exactly do you start?


STEP 1: YOU NEED CUSTOMER DATA


Customer Lifetime Value helps you understand the success of your marketing campaigns and channels in the long run. But to be more precise in your campaigns, you need to understand your customers and draw insights that will guide your decisions. It’s important to map out your online and offline data points to obtain as much information as possible, such as:

  • User identification: If you cannot identify your customers, you cannot calculate a CLV. It also becomes impossible to provide an exceptional customer experience.

  • Number of orders: In the example above, the CLV is calculated based on four orders. But a high CLV doesn’t automatically mean that the customer is loyal. Instead, the order frequency tells you more about the customer.

  • Days between orders: Knowing the days between the orders of your customer base helps you to understand whether a customer has churned or will place an additional order. This will influence the distribution of your marketing budgets.

  • Product details: It’s important to consider what was bought and what additional products or accessories can be recommended. For instance, after spending £1500 on a camera, you may not need a second one but rather purchase accessories like a memory card or lens. Price also impacts recommendations, as customers who have already spent a lot may be unlikely to invest in expensive accessories.

  • Online and Offline data: Don’t forget offsite data, such as local store orders or returns; these are important to calculate the CLV. If left behind, there’s a higher risk of incentivizing customers that haven’t earned them, while your loyal customers could be getting nothing.

  • Real-time data: Marketers need to adapt to specific situations across the customer journey quickly. This can range from if a visitor is about to abandon their first order or if a high-potential customer opens your website through a social media campaign.

  • Zero-party data: When learning more about customers, encouraging them to tell you more about themselves is the icing on the cake. You’re not only building a deeper relationship to get first-hand information, but you’ll also have a competitive advantage because that data was only provided to you.

  • Predictions: An AI-based prediction of the CLV for the next 30 days or 12 months helps you to move away from distributing your marketing budget through a watering can principle to an insight-driven approach.


STEP 2: CENTRALIZE YOUR SILOED DATA


Once you have identified your data sources, it’s important to look for additional data sources that can enhance your CLV insights for more effective campaign analysis. But how do you effectively use offline data or information on order frequency? The answer is to centralize your data in a Customer Data Platform (CDP).


By doing so, you eliminate error-prone processes that involve transferring data across multiple platforms. With a CDP at the core of your MarTech stack, you can easily store all the necessary data in one place, structure it into unified customer profiles and dashboards for quick insights, and leverage these insights to take action. A CDP provides a unified view of each customer, allowing you to identify customers, track their behavior across the customer journey, and segment them into target groups to deliver personalized messages and optimize the customer experience.


STEP 3: USE INSIGHTS TO INCREASE THE CLV


Storing and unifying your customer data in one platform makes it easier to draw actionable insights. But actioning this data requires marketing automation capabilities or tools, which are often integrated into your CDP or a part of your Digital marketing suite like Mapp Cloud. Here are some common ways you can make use of the data and insights you have.


AI-BASED PREDICTIONS


In this scenario, understanding Customer Lifetime Value can help you make informed decisions about allocating your marketing budget over the next 12 months. By segmenting your customers into five categories based on their predicted CLV, you can focus your resources on the most valuable groups:

  • Loyal Customers

  • Promising Customers

  • Average

  • Low chance

  • Lost

Rather than spreading your budget evenly across all segments, you can strategically invest in rewarding your loyal customers with special offers and incentivizing promising customers to increase their CLV. This approach ensures that your marketing efforts focus on segments most likely to bring long-term value to your business.

FREQUENCY AND DELIVERY CHANNEL


Optimizing the allocation of your marketing budget is one way to increase the Customer Lifetime Value of your customers. Another option is optimizing communication by adjusting the frequency and delivery channels for ultimate customer-centricity.


The Forrester Total Economic Impact study on Mapp Cloud found that marketing teams lacked a clear oversight of messages that other team members sent from their multiple tools. Without this transparency, they were over-messaging shoppers, lacked tracking, and achieved poor customer engagement. But finding the right balance to suit the customer can result in a pleasant experience resulting in more purchases made and an increased CLV.


Another customer-centric approach is building segments based on the recency and frequency of orders in combination with CLV. This enables you to find your loyal customers and reward them for their loyalty by reaching out to alert them about sales, exclusive deals, and product launches.


AUTOMATION AND PERSONALIZATION


It’s no secret that a personalized message at the right time leads to a better customer experience and increases CLV. But the problem is that many companies struggle to combine their knowledge about their customer’s preferences, behavior, and loyalty status with their marketing platform. With siloed data and tools, they’re often manually switching between platforms and carrying out simple tasks repetitively. It’s why it’s important to invest in a platform with these core capabilities to act on real-time customer insights to personalize your CX at scale.

It’s why it’s important to evaluate your MarTech solutions on a deeper level to consolidate your data and tools into a seamless marketing operation: CDP + Marketing Automation + Analytics. From there, you can automate processes and personalize countless message content for each customer daily to deepen your relationships.


MAPP CLOUD ACTIVATES INSIGHT-LED MARKETING


By adopting Mapp Cloud, our clients could enable insight-led marketing that translated into optimal customer experiences. In fact, the Forrester TEI study found one retailer, in particular, unlocked the full potential of our platform and how it helped in creating a greater Customer Lifetime Value:


“We started to tailor offers or communications to people who lapsed, and we also moved people into a loyalty customer segment. We kept people engaged so that instead of converting twice a year, they made as many as four purchases,” Paid and Organic Performance Marketing Executive, Retail.


Want to know the impact Mapp Cloud had in helping customers achieve a greater customer lifetime value? Get your copy of the study below.


This article was first published by Mapp. Permission to use has been granted by the publisher.

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