Media Unleashed

Unleash your media. Run.

How and Why Marketers Should Embrace Customer Lifetime Value

By: Ashanti Sears    December 30, 2021

Marketing strategies are oftentimes focused on the present and don’t consider customers for the long-run. Keeping customer lifetime value (CLV) at the top of the priority list is a strategic way to acquire, develop and retain the most-valuable customers for business growth. Google believes investing in long-term customer relationships, instead of constantly optimizing volumes of short-term interactions, is more conducive and influential to revenue goals.

Here are a few tips for transitioning to a more long-term marketing strategy.

First, consider risk when thinking long term. It’s important to anticipate that customers will not behave exactly as planned. Including the discount factor – finding future cash-flow values – in the CLV model includes that risk and uncertainty. Normally, companies would decrease their CLV metric to include that risk factor, but doing so actually narrows their understanding of the future and deprives them of valuable opportunities.

Running and comparing CLV models that are short-term and long-term focused, then noting their differences, is a great way to differentiate the two types of customers to tailor the approach to both.

Second, don’t spend so much time on the “perfect” customer. Yes, it is amazing to know the exact time of day and day of week the ideal customer will be online, and to know every interest and demographic of them, but focusing solely on that group is limiting the effect of the initiatives implemented. Start simply by looking broadly for customers who are more valuable than those being acquired today, then start to drill down, but not too far.

Third, always look for new types of customers. The primary source of data for CLV models is the company’s data, but it will be biased because it’s based on the types of customers that have been acquired in the past. If current marketing actions are oriented toward immediate purchasers, then those likely to engage in longer-term relationships may not represent a substantial portion of the current data set.

As such, a portion of the marketing budget should always be put aside for exploration: finding and engaging with new types of customers that may be a more substantial source of long-term growth than the current ones. The best customers may not have been found yet. Keep searching.