House of the Customer | Making the case for customer lifetime value

Marketers and CX Professionals: Let's continue to build the MarTech stack to deliver personalized omnichannel CX.

?? Want to take this further? This is what I do: I work with organizations to evaluate platform investment decisions and operationalize martech and CX platforms. Contact me for more info and to talk about it .

Featured Article | The Case for Customer Lifetime Value as a Core KPI

This article was written by Greg Kihlstr?m for CustomerThink.

TL;DR: By focusing on CLV, businesses can gain insights into the long-term value of each customer, identify high-value customers, make informed decisions about customer acquisition and retention strategies, and prioritize customer satisfaction and loyalty.

Customer lifetime value (CLV) is a crucial metric that businesses should prioritize in order to drive sustainable growth and profitability. CLV refers to the total value a customer brings to a business over the course of their relationship. It takes into account not just the initial transaction, but also the potential for repeat purchases and long-term loyalty.

The business case for CLV

From a business lens, customer experience, as well as marketing, is often seen as a cost. Companies focus on how much they have to spend to acquire a customer and make a sale. However, this perspective fails to recognize the broader investment that comes with acquiring a customer. When a customer is acquired, a relationship is formed, and the goal is not just to make a one-time sale, but to cultivate a loyal customer who will continue to buy from the business in the future.

Listen: Greg talks with Tifenn Dano Kwan from Amplitude about the importance of aligning product and marketing. Catch the episode here , or click below.

More from The Agile Brand with Greg Kihlstr?m Podcast

The top-ranked enterprise marketing podcast for leaders and aspiring leaders, now in its 6th year with over 500 episodes, and millions of episode downloads.

Listen on: Apple? |?Spotify ?|?Amazon

By looking at CLV, businesses can start to view customer acquisition as an investment rather than a one-time transaction. They can evaluate the profitability of each customer and determine if their investments in acquiring that customer were worthwhile. This perspective allows businesses to justify their upfront investments and make informed decisions about where to allocate their time and resources.

The CLV Advantage

CLV connects the initial transaction to the long-term value of the customer. It provides insights into the current value of the customer relationship and predicts the profitability of that relationship over time. By understanding the CLV of different customers, businesses can identify the customers who provide the most value and prioritize their attention and resources accordingly.

Furthermore, CLV allows businesses to make strategic decisions about customer acquisition and retention. By knowing which customers are likely to provide more value, businesses can focus their marketing efforts on finding more customers who align with their target audience. This enables them to spend less time and resources on customers who are unlikely to generate significant value.

In addition, CLV helps businesses prioritize customer satisfaction and loyalty. By understanding the long-term value of a customer, businesses can identify which customers are worth investing in for feedback and support. They can also take proactive steps to retain high-value customers and address any concerns or issues they may have. By prioritizing customer satisfaction and loyalty, businesses can enhance the overall customer experience and increase the likelihood of repeat purchases.

CLV creates category leaders

Organizations that have a focus on CLV gain several advantages over those that solely focus on transactional metrics:

• They have a more accurate understanding of the potential lifetime value of each customer. This enables them to make data-driven decisions and allocate resources effectively.
• They can identify high-value customers and tailor their marketing strategies to attract and retain similar customers. This targeted approach increases the likelihood of acquiring customers who will provide long-term value to the business.
• Organizations that prioritize CLV can build stronger customer relationships and foster loyalty.
• By investing in customer satisfaction and loyalty, businesses can create a positive brand image and increase customer retention rates.

Customer lifetime value is a crucial metric for businesses to understand and prioritize. By focusing on CLV, businesses can gain insights into the long-term value of each customer, identify high-value customers, make informed decisions about customer acquisition and retention strategies, and prioritize customer satisfaction and loyalty. Ultimately, by optimizing CLV, businesses can drive sustainable growth and profitability.

Read the rest: This article was written by Greg Kihlstr?m for MarTech . Read the full article here .

?? Want to take this further? This is what I do: I work with organizations to evaluate platform investment decisions and operationalize martech and CX platforms. Contact me for more info and to talk about it .

Links: Books | Podcast | Blog | Consulting | Book Greg as a Speaker