Measuring the lifetime value of a customer

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Oliver Trabert, chief technology officer, QuestBack
Oliver Trabert, chief technology officer, QuestBack

A recent Forrester report revealed that more than half of all companies identify the lack of a clear customer strategy as the most significant obstacle to improving their overall customer experience. Customer lifetime value (LTV), or the projected future cash flow from an individual customer, is a common metric that—if calculated correctly—offers insight into building a customer strategy.

Customers expect brands to know them and match appropriate offers with their preferences. Many best-in-class brands are leveraging social to engage their most valuable customers, gather insights, deliver relevant offers, and nurture customer satisfaction. With engaged customers spending 20 to 40% more than the average customer, a well-thought-out strategy pays off.

1. Tap into data from every customer touchpoint. Brands must get to know each individual customer on a deeper level to better guide which marketing and sales tactics, such as loyalty programs and cross-selling, should be directed towards which segments of the customer community. Comprehensive customer profiles based on data from across customer touchpoints—including mobile, Web, call centers, and in-store experiences—give brands an awareness of how customers are experiencing each channel. The result will be smart marketing efforts that direct customers to the channel that will engage them most effectively.

2. Account for qualitative variables. The sentiment of a customer's experience can improve the insightfulness and accuracy of LTV calculations. After all, a loyal customer is more likely to forgive companies for slip-ups and continue making purchases for years to come.

3. Identify the right customers for the right marketing efforts. Brands should strive to increase the LTV of each customer. Segmenting value by customer type will uncover marketing insights that marketers can use to more effectively target customers, improving customer value in the long run.

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