Targeting Based on Customer Lifetime Value

I've recently joined The Institute of Sales Professionals to help catalyse their outbound sales motion, and the first task to undertake was redefining our targeting. The Ideal Customer Profile (ICP) has become a cornerstone for any business that is looking to refine its targeting, however, typically we miss a key element of consideration. Businesses are finding themselves in the perfect storm, macro-economic conditions have forced many businesses to switch focus from acquisition to retention. Yet their definition of ICP isn't aligned with this longer-term focus. The reason is that by and large, ICP definition exercises don't account for Customer Lifetime Value.

You may be asking, why CLV would be important for a team of New business reps.

...Isn't that the responsibility of the CS/AM teams?

Well, yes it's likely a more important metric for the latter, yet if CLV is low, it may be an indicator that you're targeting the wrong businesses and in turn are unable to exemplify differentiated value; and in turn are unable to retain these clients.

So would it not be beneficial to include CLV as criteria when defining your ICP, or at the very least to run some lookalike modelling exercises against your most valuable clients?

Here are some other considerations as to whether you should consider Customer Lifetime Value when targeting:

Strategic Customer Acquisition

Understanding the potential lifetime value of a customer allows sales teams to prioritize high-value prospects during the customer acquisition process. By focusing efforts on clients with a higher likelihood of long-term engagement and repeat business, the organisation can optimise its resources for maximum return on investment.

Customised Sales Approach

CLV provides insights into the specific needs, preferences, and behaviours of high-value customers. Armed with this information, sales teams can tailor their approach to resonate with the target audience, creating personalised and compelling engagements that are more likely to resonate with the ideal clients.

Long-Term Relationship Building

Targeting ideal clients with a focus on CLV encourages sales teams to adopt a buyer-centric, relationship-oriented mindset. Instead of prioritising quick wins, the emphasis is placed on building trust, understanding client goals, and nurturing long-term partnerships. This approach fosters loyalty and increases the likelihood of customers becoming advocates for the brand.

Retention and Upselling Opportunities

CLV takes into account not only the initial sale but also the potential for upselling and cross-selling over the customer's lifetime. Sales leaders can guide their teams to identify opportunities to enhance customer value by recommending complementary products or services, leading to increased revenue and customer satisfaction.

Data-Driven Decision-Making

CLV analysis relies on data and analytics to determine the potential value of customers over time. Sales leaders can leverage this data to make informed decisions about which ideal clients to target, adjusting strategies based on the characteristics and behaviours that contribute to higher CLV.

Resource Allocation Optimisation

Recognising the long-term value of clients enables sales leaders to allocate resources more efficiently. By directing efforts towards clients with a higher CLV, sales teams can optimise their time, energy, and budget, ultimately improving the overall efficiency and effectiveness of the sales process.

Adaptability to Changing Market Conditions

CLV analysis is not static; it evolves as customer behaviours and market conditions change. Sales leaders who consider CLV in targeting ideal clients can adapt their strategies in response to shifts in the business landscape, ensuring continued success in both stable and dynamic market environments.

Overall, it switches the focus from short-term mindset to a relationship-focused, strategic endeavor. recognizing the long-term potential of clients, sales teams can optimize their efforts, build lasting partnerships, and contribute significantly to the sustained growth and profitability of the organisation.