MARKET - Customer Lifetime Value the Critical Metric

Changing Costs Structures are Forcing Those in Marketing to  Understand a new Customer Metric

The high cost of new client acquisition and sustaining client relationships is forcing a new paradigm of value.

Reviewing the lifetime value of a customer in a business relationship, points to where investment is most effective and needed in the client experience.

Wikipedia defines Customer Lifetime Value (CLV) as "the prediction of the net profit attributed to the entire future relationship with a customer."

The Customer Lifetime Value website by StitchDATA, suggests Customer Lifetime Value is the single most important metric for understanding your customers. CLV helps you make important business decisions about sales, marketing, product development, and customer support. For example:

• How much should I spend to acquire a customer?
• How can I offer products and services tailored for my best customers?
• How much should I spend to service and retain a customer?
• What types of customers should sales reps spend the most time trying to acquire?

In October 2017, Matt Lawson, Director of Marketing, Google Performance Ads, wrote an article entitled, Don’t get left behind: Return on ad spend is out, customer lifetime value is in. 

In the article, Lawson interviews George Popstefanov, CEO of the Digital Advertising Agency PMG and provides a case study of how OpenTable used the CLV metric to improve client response and business relationships. It seems apparent, those not moving to CLV are unlikely to survive the huge shift in the marketing paradigm.

One of the reasons this CLV metric is so important is the rising churn rate of applications. According to Alana Vieira, Google Mobile Solutions Marketing, statistics show most app users churn within 3 months. Her article last month shows how important it is to remove silos so everyone is involved in the delivery of the client experience across all platforms and geography. Measuring the results of delivery across the client experience entails using a CLV metric that everyone can access, understand and contribute to.

Why this is important:
Both customers and suppliers should evaluate CLV. Customers can estimate their value to the suppliers they use. Suppliers can understand how and where they should invest to improve the customer relationship and acquire new customers. 

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