Your Budget is Wrong: Why Customer Lifetime Value is Probably Underutilized in Your Organization

We all know that Customer Lifetime Value (CLV) indicates the average amount of revenue a single client brings to the company during the time they acquire services. Nevertheless, companies seem to disregard there is more than one way to interpreted and use the metric. Thus, the budget handout for this end is significantly lower than it should.

Customer Lifetime Value is ideal to gain insights into how clients perceive the company, their behavior, and purchase choice. 

In general, you can use CLV to make investment decisions. Organizations benefit from gauging this KPI to allocate resources to campaigns with the goal of acquiring or maintaining customers – whichever has more profitability.

The problem is, marketing strategies are almost all the time directed to customer acquisition and rarely address nurturing clients. They ignore that increasing CLV by 2% can reduce costs in about 10%!

Campaigns aiming for brand loyalty and advocates are more complex to plan and execute. However, the long-term advantages of nurturing clients to improve CLV are beyond compare. 

We have put together 3 reasons why your organization is losing potential profit by misusing Customer Lifetime Value. Moreover, why your business is failing to put the necessary funds to measure data and create meaningful relationships.

Retention Programs

Retention programs are focused on experience, exclusivity, and loyalty. They acknowledge the importance of clients as a pivotal company asset and build bridges to address necessities from customers. 

Clients are the best product designers. Retention programs provide a unique opportunity to let regular customers to actively take part in developing the brand. Campaigns to follow-up with customers are reported to drive 52% of revenue – this is 10% above the average driven by customer acquisition efforts.

Additionally, onboarding programs help to prepare the ground to start constructing a two-street relationship, in which customers receive information from the very first start to make the best out of their purchase.

Data Analysis

With thousands of potential customers, data analysis throws a lifesaver for marketers looking to generate impact and attract the right client profile. Spending on programs to evaluate online and purchase behavior assists to later align customers to find the ones sharing similarities with the brand values. 

These people are prompt to become brand advocates and bring higher revenue to the company. CLV together with customer analysis provides a clear set of data to obtain behavioral insights. At the same time, leveraging efforts to come up with business strategies taking into account these two variables have shown to increase sales growth by 85%.

Connect with Customers and Improve Their Journey

Although we live in a data-driven world, organizations failing to build human relationships with customers are those experiencing higher churn during any time of the journey. Millennials, for example, are natural advocates – they like to engage with brands with purpose. 

This shows the clear need for re-evaluating CLV as a top importance metric. Customer Lifetime Value helps to shape first-class personalization experiences – which advance relationships and connect with clients on a deeper level.

Sealing the gap between customer value and experience clears the landscape to understand your customers. CLV is a key player in this process. Customer Lifetime Value put under the spotlight the moments where products and clients are in contact, helping to evaluate the experience and profile during a determined timeframe.

Customer experience and management bring long-term revenue and impact. Loyal customers are way likely to refer brands to friends and pay more for products. A small increase of 5% in customer retention – by improving CLV, can boost revenue up to 95%.