Another topic on this blog explains the importance of building strong, durable relationships with (potential) customers. It is important, but what’s really important for marketers like you and me, is the meaning lying behind. Essentially it is about increasing the value of the customers and convert them to prospects, or even better, customers. Roughly said we don’t really care about the relationship itself; we care about the Lifetime Value.
In his excellent book ‘Email marketing by the numbers’, Chris Baggott gives a few interesting lessons for Lifetime Value. He links in a surprising way his thoughts on Valentine’s Day with how marketers have to bring love to their prospects. Marketers have to be desperate lovers…
Lifetime Value is all about listening. Getting to know all the stats of somebody’s behaviour, needs, characteristics and activities.
Lesson 1: don’t pay too much to acquire a customer.
Acquisition is important for the growth of your company, but brand new customers cost a lot more than existing customers to service. You can reach the ideal balance by measuring and tracking all useful information like retention rate, cost of servicing and so on.
Lesson 2: profitability needs to be measured by customer.
An inextricable connection with marketing and sales is profit. Profit is measured in every business, but it is usually measured by product or service. C. Baggott says this is wrong, marketing is not all about the product. I completely follow him here. Look at the profitability of the customer. What is the value of a certain customer for you? Look individualised; split your customers in profitability segments.
Lesson 3: increase customer margins.
Increasing the customer share of wallet is the message here, short and clear. Enlarge your offerings, instead of pushing sales for one product.
Lesson 4: create loyalty.
The most valuable users are very important for every business. Try to increase this segment, think long-term. Loyalty and lifetime value create a great marriage.
Lesson 5: view customers as assets, focus on relationship.
The goals of every company remain the same: to make more money and grow, that’s no secret. Essential for this is the satisfaction of your customers. Working on relationships will enlarge customer satisfaction.
LTV & Email?
Why am I talking about LTV on an email marketing blog? Quickly take a look at the opportunities email brings you. Email offers you the chance to keep in touch, to interact, to tell a story, to introduce an idea; you can use it all the way to build loyalty for your brand. Email can be an essential tool on your road to lifecycle driven communication. Email can give a solution in every step of your customer lifecycle.