How Personalized Marketing Increases Customer Lifetime Value

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Why You Can’t Ignore Behavioral Data in Marketing

You can focus your marketing efforts on one of two things to grow your business: acquiring new customers or retaining existing ones. Bringing in new customers is significantly more expensive than working to keep your current ones, and according to research conducted by Frederick Reichheld of Bain & Company, a 5% increase in customer retention rates can increase your profits anywhere from 25 to 95%.

The longer you keep a customer, the more value they provide you over time—that’s where customer lifetime value calculations come in.

What is customer lifetime value?

Customer lifetime value (CLV) shows you how much profit your business can bring in from one customer over the time they spend with your brand. This means that your customers have future value to your company; they’re worth more than the amount they spend on any single occasion.

Looking at customer lifetime value also gives you insights into which customers you can expect to stick around. Customers with high CLVs are more likely to make repeat purchases, while ones with lower CLVs are more passive customers who will require additional effort on your part to re-engage them.

Why customer lifetime value is important for your brand

Here’s why customer lifetime value and customer retention should be key metrics that any marketing team looks at, according to a study by Adobe:

  • 40% of a company’s revenue comes from repeat and returning customers even though they only represent 8% of all shoppers.
  • You would have to bring in five new customers to equal the value that one repeat purchaser brings to your brand.
  • Repeat customers bring in even more revenue during slow economic times and holiday seasons.
  • Returning customers generate three times the amount of revenue per visit than other shoppers.
  • Conversion rates for repeat and returning customers are five times higher than first-time shoppers.

How to calculate customer lifetime value

It’s not difficult to calculate customer lifetime value; all you need is the right data. Here’s how to calculate it to get a clear view of where a customer’s LV currently stands and see how you can improve it in the future:

Multiply the average order value and purchase frequency of a customer and divide that answer by the average lifespan of your customers.

There are many variations of this formula, but this calculation is a good starting point to get an idea of customer lifetime value and start taking steps toward increasing it.

There’s no magic number; no one ideal customer lifetime value: It varies drastically by industry and company size. Whatever CLV you get from the calculation, you should aim to keep it higher than your business’s customer acquisition cost.

How to increase your CLV through personalized marketing

Now you know how to calculate customer lifetime value and why it’s such an important marketing metric, but how do you improve it? Here are a few ways you can increase CLV with Lytics:

Build customer segments with real-time personalization

Segmenting customers based on their behavior and customer profile is a common marketing strategy, but segmenting them into categories like age and location isn’t enough. People want recommendations for products and services that actually match their interests. Think about streaming services like Netflix: They don’t recommend content to you by segmenting their audience—they look at your behavioral data to find out what, when, and why you watch the shows that you do.

Using a customer data platform (CDP) like Lytics allows you to collect and analyze that behavioral data to gain important insights into your customers in real-time, ultimately increasing your customer lifetime value.

Talk to your customers—not at them

Personalized marketing means that your efforts are targeting a specific person or group of people, but do you really understand what they want? Building customer profiles can help, but collecting and analyzing their behavioral data lets you gain deeper insights so you can create a digital experience personalized to your customers.

If the product or service you’re marketing toward a customer isn’t relevant to them, you’re wasting both their time and yours. Lytics helps you analyze behavioral data in a way that zones in on what matters to your customers at that specific time, making them feel understood and valued while increasing their lifetime value to your brand.

Find and use the right data, the right way

The quality of the data you collect about your customers is way more important than the quantity. You could have mountains of data and a huge team to analyze it, but without the right data, you won’t get an accurate view of your customers. Lytics focuses on collecting the relevant, usable behavioral data from your customers’ daily interactions.

Now that you have the data you need, you also have to use it in the right way; this means transforming your behavioral data into actionable knowledge. Lytics uses advanced machine learning, AI, and data science to give you the insights necessary to increase customer lifetime value.

Enhance your personalized marketing efforts with Lytics

The bottom line of customer lifetime value is simple: Bring continuous value to your customers, and they’ll return the favor by generating more revenue for your brand. Lytics can help you take a more personalized marketing approach and increase your customer lifetime value by collecting and analyzing the right behavioral data to make data-driven, science-backed decisions. Get started with Lytics, and watch your customer lifetime value grow.