Simply put, brands are addicted to customer acquisition. Driving net new sales and acquiring new customers is often the primary key performance indicator (KPI) for any given marketing campaign, leaving little to no resources devoted to the actual key business driver: repeat customer acquisition and lifetime value (LTV). Whether they’re selling to consumers, businesses or even nonprofit organizations, businesses that have stood the test of time have successfully been able to not only understand but also drive better LTV through carefully crafting long-term connections.
This is no easy feat. It takes time and a holistic view of your customer, coupled with quality data to understand your buyer and their engagement with your business. From there, you’re tasked with developing that relationship in a meaningful and scalable way.
Online retailers have a unique challenge in that marketplaces like Amazon.com and Google ultimately own the direct customer relationship, disintermediating brands from their end customers. Brands are forced to focus on a steady state of customer acquisition, competing in environments that are strategically designed to obfuscate the differentiation they aim to create in the hearts and minds of consumers. It’s no surprise therefore that direct-to-consumer (D2C) brands have stolen the spotlight in recent years. They’ve understood how to capture a direct customer relationship, circumvent these walled gardens, and ultimately are not reliant on third-party marketplaces. While it’s easy to place your product on Etsy or Amazon and earn a sale with a few simple clicks, not bringing consumers to your site and letting them directly engage with your brand is a major missed opportunity.
Given that consumers spend on average 8.8 hours a day engaging with digital content, now more than ever it’s crucial for brands to leverage direct customer connection in order to stay afloat and ideally thrive in an oversaturated market. As you start your own journey into understanding customer lifetime value for your brand, here are three thoughts on when and how to make the most of it.
How Brands That Make it Work Are Connecting With Customers
The brands that make it work are the ones that are transforming their websites and marketing campaigns into connected experiences that extend beyond digital and into offline experiences, creating the types of direct relationships that customers crave. The popular luggage brand Away created its own travel magazine and blog, while Warby Parker, arguably the original D2C brand, created maps of the “best places to read a book” in cities where its brick-and-mortar stores were located. These creative content pieces illustrate how a suitcase or pair of glasses can bring a brand to life simply by being relevant to consumers’ lifestyles.
One key factor in these brands success is authenticity. If your brand is going to stand up for something, it should be as embedded into the fabric of your business and culture as the Growth Gene. TOMS, the iconic shoe company, was founded almost 13 years ago, but is still primarily associated with its mission to donate a pair of shoes to a child in need for every pair purchased. The footwear brand’s marketing campaigns continue to beat the drum of this message even 10 years later, as manifested through its “One Day Without Shoes” initiative. Given the seemingly infinite number of competitors in any given space, coupled with the virality of social media, being disingenuous will ultimately be snuffed out by consumers, and your brand will suffer.
Another key factor is personalization. Forbes found that 60 percent of millennials tend to gravitate towards purchases that are an expression of their personality, enabling them to feel like they’re participating in the lifestyle these items represent. With this, it’s important for brands to evolve their thinking on how to measure success and for what they’re solving. Many brands forget that it’s not just about having the right data, it’s about knowing what to do with it and how to analyze it to understand why your customers think and behave the way that they do. Set yourself up for success by having a central place where customer data is stored in a structured way that’s organized for action. Create smarter segments that enable you to introduce more relevant, personalized experiences, content, products, services and, ultimately, longer-term relationships. Digital may have changed how we define relationships, but it hasn’t taken away the need for meaningful connection.
How to Create and Implement an Effective Retention Program
If you have repeat customers, it’s important to understand why you won that customer in the first place. A “spray and pray” approach simply doesn’t cut it anymore, as strategic methods are now essential to winning and keeping customers in a marketplace environment. The key is to be seen as more than a commodity, whether that’s physical or digital. It’s important to establish differentiation in a way that connects with a customer and makes you a part of their everyday life.
There are various steps you need to take in order to implement an effective retention program. The foundation starts with giving your marketing a personal touch and optimizing your customer lifetime value. In fact, 51 percent of consumers are more likely to make a purchase if content is personalized. You need to go beyond the product. Tailored messaging is everything; it all starts and ends with how well you understand your customers.
Predictions for the Space as it Evolves
Customer lifetime value is created from loyal customers who feel as though they have a personal relationship with a brand. While many think straightforward sales are more important, sales are short-lived if the customer isn’t given a personalized experience. Therein lies the differentiator between good and great brands.
There are many unknowns in this industry, and the space is constantly evolving. What I can say confidently is that the industry will continue to be oversaturated until rapid consolidation starts making serious dents. Due to these changes, it’s important to get smart now, and use your data strategically. Focus on customer lifetime value and repeat business or loyalty programs. Invest in these with proper solutions for data management, insights, personalization tools and measurement. Your goal should be to develop a holistic, all-encompassing, 360-degree view of your marketing strategy, beyond a single campaign or channel. If you’re going to dare to grow and build brand recognition, customer loyalty is the foundation of everything.
To hear more from Scott in person, be sure to join us for Connect to Convert at the Westin Boston Waterfront, September 25-27, where Scott will be speaking on Customer Lifetime Value. Register Here!