According to Forbes, Customer Lifetime Value, or CLV, involves the current net dollar value of a customer as well as the any future value and activity. CLV is not just a number assigned to a customer; it’s a way to measure the satisfaction with a product and service, the likelihood of customers to evangelize a brand, and lastly it’s a measurement of converting potential customers to your brand or product. Bottom line: CLV gauges how well-perceived a brand is and the likelihood of customers to purchase that brand. As 2014 ramps up, marketing tactics have changed to adapt to the dynamic preferences of the consumer, and so too have the ways to capture CLV.
Three categories within the realm of customer personalization are primary ways of achieving positive CLV:
1. Learning tendencies and acting on them
Customer personalization is a very recent trend that focuses mainly on treating all customers that a company has as individuals: think mass customization but with people in a sense. When a customer feels a more personal interaction with a brand, loyalty will increase, and subsequently the customer’s spending with the brand will increase. The first method to accomplish this idea of customer personalization is to gather the tendencies and spending habits of individual customers and then to act on them. The main way to learn the habits and idiosyncrasies about the customer is through big data.
Big data is the catch-all term used to describe the data collected from a customer that buys a product, likes a brand on Facebook, or downloads a brand’s mobile app. By sifting and sorting through this data, brands can easily see the tendencies of virtually all of their customers. To act on this knowledge they can send offer-specific emails, personalize the mobile desktop website experience, and give special deals to show the customer that they are important to a brand, thus greatly increasing their sense of connection with that brand.
2. Stimulating a strong call to action with constant contact
The second technique to achieving CLV via customer personalization is by remaining relevant with customers. In this age of constant media and advertising bombardment, companies feel that if they send too many emails or other forms of engagement, their communication will get lost amongst a sea of thousands of messages.
That may not be the case however. In a recent study by Adobe, 75% of customers want companies to use their personal information to improve their shopper experience. As stated above the difficult part is not acquiring this information on customers but rather the challenge that comes when companies decide on how to present information to potential customers so that it is not dismissed as spam.
Email and SMS text messages are two examples of great ways to stay in contact with customers without being bothersome. Let’s say a customer receives an email for a promotion on a retail website and ends up purchasing an item and provides their personal information to be contacted with in order to receive future discounts. The next week a text message is sent to that customer directing them to an offer on the company’s webpage. This is a hyper-personalized customer experience that will have a positive outcome on them and stimulate the customer to both visit that specific brand’s website and have a higher loyalty with them.
Focus on cross-selling and up-selling based on customer likes and dislikes.
The final method to achieving and increasing CLV is simple but seldom done correctly: cross-selling and up-selling. Traditionally, cross-selling is the act of selling supplementary products or services when a customer purchases a product. For example, if a customer purchases a laptop it is encouraged to cross-sell accessories such as a laptop case or mouse.
Up-selling is defined as the act of offering a more expensive product to a customer in the place of the one they are trying to purchase. The most common example of this is “super-sizing” a meal at McDonald’s. In the realm of customer personalization, up-selling and cross-selling are actually very easy to achieve mainly because existing customers have a larger amount of data in company databases. As a result, the companies are able to see the transaction history of specific customers and offer additional products that are relevant or offer a higher quality brand or product with more features than what they are buying.
All in all, if a company can understand the consumer using big data and personalization, it makes the process of cross-selling and up-selling more effective and will subsequently increase the consumer’s CLV. In traditional marketing, CLV is just a number or statistic that has no real value besides how much a customer is worth to you.
In this era of big data however, CLV extends to include how much the relationship between a customer and brand is worth. Big data and customer personalization have made it easier to learn information about customers making it easier to build relationships with an entire client base without ever actually meeting them face-to-face. This is the future of marketing.
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