- by BethSchultz, Blogger
- 7/18/2014 1:19:14 PM
Right, Jim. So there are a couple of opportunities here for marketers. One is to use CLV to optimize the marketing spend -- no reason to pay postage on mailers that won't have the desired effect. And, two, to use CLV to identify which customers need your retention efforts, or are good candidates for upsell or cross-sell, for example. Understanding CLV isn't a trivial exercise though -- lots of metrics could come into play.
- 7/18/2014 10:46:39 AM
@kq4ym. Interesting point about smaller customers influencing bigger buyers through things like social media activity and the need to factor that into CLV. We do know that big businesses like to see an established customer base before they will sign on with a new supplier.
- by kq4ym, Data Doctor
- 7/18/2014 9:06:30 AM
Good point about paying attention to other operational metrics. It might be found also that those "smaller" customers might well be influencing bigger buyers via social media or even word of mouth, as the customer recommends your company to others. All need be factored into the otherwise seemingly cut and dried CLV numbers.
- 7/18/2014 8:47:07 AM
@Beth, it was more about shifting resources rather than excluding people. But that's a great point. There are customers who might be irritated by marketing or for whom the marketing would just otherwise be a waste. The other consideration is that the analysis might show that you don't need to market to some people because the relationship is such that they will keep buying the same amount of product even without it.
- by BethSchultz, Blogger
- 7/18/2014 8:15:36 AM
Hi Jim. One of the things I've always thought was pretty interesting about CLV is that the analysis can help identity who not to market to -- either those customers at the end of the "lifetime" relationship and so would never respond anyways or those who would respond negatively -- say cancel a subscription or service -- to the reach out. Did the article delve into that at all?
- 7/16/2014 10:19:37 AM
@Johnballa. You're right about the importance of drawing metrics from across the organization. It isn't easy. I think one reason that things like operational costs might get left off in this type of analysis is that someone in, say, the marketing group is away of their direct mail efforts and can assign the costs to a product line or a class of customers.
Looking at metrics from across the organization may mean factoring in centralized services, including IT. Breaking out those costs on a project or product line basis can be done but it takes extra work in many instances.
- by @johnballa, Blogger
- 7/16/2014 9:55:22 AM
Thanks for highlighting Amy Gallo's fascinating post about CLV and adding thoughtfully to her premise. And you're certainly right about CLV not being a new concept for the AllAnalytics community, and thankfully, neither is the idea of using analytics to calculate CLV.
There's another wrinkle in this story that bears calling attention to, and that's the need for marketers to be congnizant of the role that data has in shaping how they engage with other areas of the enterprise. The reality is that no matter how complex or simple your business model, CLV calculations need to include servicing costs and other operational metrics from other parts of the business, as well as external data points (such as social media activity).
This is all part of a larger big data issue, and it's the opportunity presented by the latent value locked in the data, combined with the opportunity cost of inaction.
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