How do you use customer lifetime value to optimize your marketing budget and campaigns?

Strategically use Customer Lifetime Value (CLV) by identifying high-value segments and allocating a substantial budget for targeted acquisition and retention. Tailor campaigns to match the preferences of high CLV customers, optimizing channels and adjusting budgets for maximum ROI. Implement personalized retention programs, analyze the CLV-to-Cost of Acquisition ratio regularly, and use predictive analytics to adapt strategies. Experiment with different approaches for optimal CLV impact, fostering enduring and profitable customer relationships.

Calculation of CLV: Utilizing historical data and predictive analytics to calculate CLV. Incorporating factors such as average purchase value, purchase frequency, and customer lifespan. Segmentation and Targeting: Segmenting customers based on their CLV to prioritize high-value segments. Tailoring marketing campaigns to address the specific needs and preferences of each segment. Customer Acquisition Costs (CAC) vs. CLV: Comparing CAC with CLV to ensure that the cost of acquiring a customer is justified by their long-term value. Adjusting marketing strategies to optimize the balance between acquisition costs and potential lifetime value.

Customer Lifetime Value (CLV) - though approximation - provides a good idea about a segment of customers and their expected total contribution to your business. When decision makers understand how valuable that customer group is for them, they are expected to tailor their actions for that group specifically. It is a great tool for marketers and CVM, CRM teams to fine tune their approach to customer segments. Though there are nuances for each industry, for subscription based companies: (telco, bank, insurance, subscription based service providers like streaming services, utility companies etc.), it could be as simple as: Avg. Monthly Spend * Expected Tenure (Lifetime)

Acompanhar o CLV é algo primordial para todo o time de GTM. Entender quais os segmentos/perfis de clientes mais permanecem na base, nos ajuda a identificar o público que o nosso produto/servi?o mais entrega valor, fornecendo um direcionamento para os times de marketing e vendas onde direcionar o foco.

Customer Lifetime Value (CLV) - though approximation - provides a good idea about a segment of customers and their expected total contribution to your business. Based on this value, decision makers can start tailoring their actions towards those segments and this can happen at different lifecycles of a customer. In the acquisition case, (Assuming that you are mainly using marketing to acquire customers) CLV sets the upper boundary of how much you should spend on your marketing to acquire this customer (CAC, Customer Acquisition cost) assuming that the business wants to stay profitable. However in real life it is common that, companies are willing to spend beyond the CLV in order to show "growth" of business at the expense of loss

Retention Campaigns: Investing in targeted retention campaigns for high CLV segments to enhance customer loyalty. Utilizing personalized communication and incentives to encourage repeat purchases. Cross-Selling and Upselling: Identifying opportunities for cross-selling and upselling based on customer behavior and CLV. Implementing strategies to increase the average transaction value and extend customer lifespan. Predictive Analytics for Campaign Optimization: Using predictive analytics to forecast future CLV and anticipate customer behavior. Adjusting marketing campaigns in real-time based on predictive insights.

Testing and Iteration: Conducting A/B testing on different marketing channels and messages to identify the most effective approaches. Iterating marketing strategies based on data-driven insights and performance metrics. Customer Feedback and Satisfaction: Monitoring customer satisfaction metrics and feedback to ensure positive customer experiences. Incorporating customer feedback into marketing strategies to enhance brand perception and loyalty. Long-term Relationship Building: Focusing on building long-term relationships with customers through personalized communication and value-driven interactions. Investing in customer education and engagement initiatives to strengthen brand affinity. Dynamic Budget Allocation: Allocating marketing

CLV is important because one needs to understand how to acquire & retain customers. While acquiring new customers is essential, retaining existing ones is more cost-effective and impactful since 80% of revenue often comes from the top 20% of customers. By focusing on loyal customers with tailored marketing campaigns, exclusive offers, and loyalty programs, businesses can increase their lifetime value. Acquisition costs are high because it requires cultivating brand awareness in market for those unfamiliar to the offerings. By focusing on keeping current customers happy, their spend will increase over their lifetime consumption and secure reoccurring revenue for the company.

Though CLV is commonly coupled with concepts like CAC or optimizing marketing budget, there is a retention angle that we should not miss. You can also use CLV to identify the real value of a customer and hence tailor your actions at the retention stage. If a group of customer is super valuable, you might think of providing a differentiated service level (i.e. faster call center agent access without hanging in the queue or privileged gestures / experiences) Moreover if you predict that customer is at risk of churn, you could potentially offer some monetary benefits to the customer (discounts, free add-ons etc.) in order to keep their business.