On a recent business trip to Las Vegas, I was greeted by the the hotel desk attendant with an enthusiastic, “Welcome back.” The preferred treatment continued when I called guest services and was asked if I’d like to order the same meal I had last time I visited. I was getting the red carpet treatment, even though I had only visited once, eight months earlier.
Interactions like this provide an interesting glimpse into how different brands prioritize customer value within their engagement strategies. The hotel had clearly made investments in technology and service as part of its strategy, but other brands in other verticals will likely have trouble replicating this kind of service for every single customer.
That’s why lifetime value is so important.
Brands typically want to create deep bonds with their current and potential customers, but the key to remember is that, to be cost efficient, the level of engagement they cultivate should be proportionate to the estimated lifetime value of the customer. This is especially important in brand marketing to, and segmenting, affluent audiences.
Building engagement is a valuable marketing approach, but brand marketers have to be conscious of what they’re trying to do. Many can look at social media and say it has “high engagement,” but does it actually grow the bottom line? If you’re able to engage with the customers who carry the most potential value, it should. But most brand marketers can’t easily differentiate who is driving their engagement. To more clearly determine ROI, these scores must be related to those with the highest customer lifetime value (CLV).
Most brand marketers already have CLV or equity scores for their prospect segments, associating a potential dollar amount with each kind of consumer. But more often than not, this CLV data is an isolated measure. It’s generally not used in marketing planning or execution. Instead, CLV stays stuck as an analytical measure used for presentations and reports.
This shouldn’t be the case. Brand marketers should use CLV as part of the foundation of their engagement marketing strategies, crossing CLV with their audience segmentation strategies to help group potential customers by product, demographics and estimated lifetime value. CLV isn’t necessarily tied to just estimated financial capacity, either. The factors determining CLV may be different across every industry and advertising vertical; it can add another layer that makes audience data more actionable. Brand marketers should start by understanding each customer segment. After determining the estimated highest potential segments, they can build strategies around how to appropriately engage with each segment.
To help get a better sense of this in action, let’s look at other forms of engagement. Call service centers are another customary way to engage with consumers, and in most cases consumers are treated similarly, regardless of their potential CLV. This may not be the best investment of a brand’s marketing budget. By applying segmentation to callers, a call center could consider pursuing a more active engagement strategy that devotes more time and service to potential higher CLV customers.
If brand marketers are going to invest resources, time and money to help drive more optimal customer engagement, then they need to help ensure that that engagement is providing real benefit to their business. High-touch programs or high-engagement scores that fail to increase the bottom line are usually not beneficial and may result in budget cuts. By better leveraging CLV, brand marketers can address their audiences differently, developing engagement strategies that aim to deliver higher returns from their highest-value customers.