Moving beyond a growth plateau with customer lifetime value
Unlocking value and driving valuable growth is a desirable trait among most marketers, but doing so proves tricky. Chris Attewell, chief executive officer at Search Laboratory, explains how to do this more effortlessly.
Growth plateaus are inevitable when businesses are working toward blended revenue targets. Marketing strategies are often driven toward overall revenue and overlook the key pillars of growth within the business – profit, new customer acquisition and customer retention.
Given the vastly varying value of individual products, services and leads, targets eventually reach a static period and become increasingly difficult to reach on a consistent basis.
Search Laboratory on how to unlock lifetime customer value
Harnessing lifetime value (LTV) is the key to nurturing a greater understanding of your audience and their behaviors. By looking at customer data and individual product profits, you’re able to navigate your wider marketing strategy toward the highest-value customers who are most likely to convert and drive long-term growth.
It’s difficult to gain perspective over the longer-term, sustainable benefits when working toward solely transactional revenue. Implementing LTV data into your strategy illustrates the gaps in blended targets, often revealing products that are operating at a loss and making it possible to structure products via profit and avoid significant pitfalls in ROI.
The power of lifetime value
Working with lifetime value data makes it possible to calculate the expected value of new customers over long periods and gain perspective on how much an average new customer is worth.
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However, it’s only possible to reap the benefits of LTV if there is the option to calculate it within your platforms – for example, using Google Analytics to identify new and returning sales or calculating the LTV at the point of sale and then pushing that data back into Google Analytics.
Customers provide streams of data within every touchpoint and sale. The key is to start small and evolve toward more complex and insightful modeling solutions, moving closer to your audience and better understanding their behaviors.
Optimizing the potential of lifetime value
To harness the full potential of lifetime value, it’s important to unlock the key factors that impact LTV and utilize them. Typically, avoiding sweeping averages to prevent blocking new opportunities.
KPIs are at their most useful when they heighten your perspective, allowing you to segment data and seek new opportunities, ie revenue enables investment into lower-funnel activity, but becomes less useful as a KPI the further you move up the funnel.
The full potential of LTV is unlocked by segmenting individual products and basket composition. For example, your average 12-month LTV of a customer might be £80, although for customers who purchased expensive shoes, it’s actually £140.
Combinations of products bought together will also influence the LTV and likely change again further down the line. Customers with a higher average basket value are likely to have a higher average LTV.
Audiences provide rich data in every touchpoint and sale, which you’re able to refine and estimate their future value simply by analyzing the products they’re viewing, what they’re purchasing, how frequently they’re converting and the average value of their basket.
Using your first-party data, it’s possible to calculate the LTV of every unique customer based on their individual user journey through the application of automation and machine learning (ML). This enables you to value your existing customer base and future customers who have shown interest but are yet to purchase.
At Search Laboratory, we build these solutions for our most innovative customers and believe this is the future of marketing and staying ahead of your competition. Evolving toward these more advanced, sustainable solutions is crucial in moving away from hitting weekly targets and instead optimizing toward long-term, profitable growth.
To get the true value of LTV and inject it into your wider digital marketing strategy, it’s essential to consider the key factors surrounding your business such as returns, margins and delivery costs.
This topic and approach are discussed in greater detail in our recent retail online workshop ‘Unlocking retail data to drive true business growth.’
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