Customer Lifetime Value: Developing Your Marketing Strategy for the Long Haul
When we look at the value of a customer, it’s tempting to only consider the here-and-now: if she clicks on this ad and buys, we have a specific ROI for that action. If she makes a purchase, then we’ve accomplished our mission to convert her.
But what about the lifetime value of that customer? What is she worth to the company over the duration of her relationship with your brand? Understanding Customer Lifetime Value (or CLTV) has tremendous value in helping you identify high-value customers and keeping them engaged long-term.
Strategize Engagement Tactics to Adapt to Needs
The way you initially attract a customer to your brand before she’s made a purchase will be different than how you engage her once she’s become a high-value customer. It’s important to segment your audience so that existing customers — those you want to buy from you over and over — aren’t getting the same marketing message as not-yet-customers.
Consider those annoying mailers you get from your cable company. You might have been a customer for decades, so why are you getting “new customer” offers? Not only are these not targeted to you, an existing customer, but they also might put you off from continuing to do business with them if you aren’t getting the lucrative offers that new customers are.
This illustrates the importance of continually engaging those high-value customers by appealing to them in evolving and relevant ways over the duration of your relationship with them. Staying tapped into what they need over time, you can deliver just that and foster a healthy connection with people who will continue to trust and buy from your brand.
Continue to Solve Their Needs
This component of delivering to a customer long-term depends on the products you sell. If you sell something a customer will continually need over time (razors or laundry detergent), all you have to do is stay top-of-mind and deliver quality products to keep their business.
But what if you sell something that people only buy one or a few of over a lifetime? Consider a mattress: most people invest in this high-dollar purchase once every 10 years or so. They might not even buy from the same company the next time around. So how do you continue to nurture that relationship in between those spread-out purchases?
Consider other ways you can solve your customers’ needs. Perhaps that means expanding your product line to include memory foam pillows and sheets. Or offering her a discount on her next purchase. Once customers know your mattresses are quality and a good price, they’ll be more inclined to buy complementary items from you…as long as you’re doing your job to develop that long-term loyalty through your marketing. By consistently putting your brand in front of that customer, she will know that you are there for her, thus increasing her brand loyalty.
Establish and Monitor Your KPIs
Maintaining a relationship with high-value customers over time takes effort. That’s why establishing key performance indicators (KPIs) is so crucial: when you understand the metrics that indicate you’re doing a good job at continually engaging your customers over time, you can streamline your strategy for best results.
What do you need to pay attention to? Interaction with your marketing campaigns is crucial. For example, if you’re using email automation to stay connected with past customers, you need to establish what you want to achieve with that effort. Maybe you’d like to see an unsubscribe rate under .5%. Or maybe you’d like to see repeat sales from these emails of 25%. Having campaign metrics — attaching marketing campaigns to actual sales — can also provide indication of the success of your efforts.
Whatever you determine your KPIs need to be, pay close attention to consumer signals across all channels. You need to understand how past customers interact with your brand through mobile, your website, retargeted ads, and social media.
You might notice that existing customers aren’t clicking your retargeted ads. In that case, look into what’s being advertised. Perhaps you need a different strategy there. Or maybe they’re unfollowing you on social media. That might indicate that there’s little value for them once they’ve made a purchase. Strike a balance between attracting new customers and acknowledging and supporting existing customers.
Find a Strategy That’s Repeatable and Profitable
While your initial customer acquisition costs may be relatively high, your ongoing retention costs should be significantly lower. But do keep an eye on them. The last thing you want is to spend more than your Customer Lifetime Value in a failed attempt to secure customers long-term.
As you pay attention to your KPIs, as well as customer behavior, you should be able to tweak your marketing strategy to align with what will best serve your customer moving forward. Your strategies should begin come to fruition, bringing customers back again and again. Though you will need to constantly monitor and tweak your efforts to extend that customer relationship, you will come upon formulas that work. Keep implementing them, but don’t assume that they’re carved in stone. Today’s customer is savvy, and her needs constantly evolve. As long as you’re willing to keep up, she’ll keep you close and remain loyal to your brand.