It wasn’t long ago that most Americans shopped in mom and pop shops. From the grocer and post office to movie theaters, dry cleaners, drug stores, and banks, these businesses were community fixtures whose owners were often treated like family. Customer loyalty was a given.
Today, US consumer culture is radically different. Instead of personal relationships between shoppers and business owners, many consumers shop in malls or chain stores that lack the individualized connections of old. In fact, according to a recent Temenos and Deloitte report, nearly a third of senior banking executives see retaining customers and their loyalty as the greatest challenge.
This is a challenge common to all industries. While mobile innovation is often considered a top priority by business leaders, many brands have yet to maximize mobile’s long-term customer engagement potential. That’s unfortunate as smartphones are ideal loyalty drivers and engagement tools thanks to their unique ability to capture real-time customer insights. This is true for a host of smaller businesses, too. The key is discovering how customers spend their money and time when they’re not in your store. What do the rest of their lives look like and how do those interactions impact what they buy?
Driving loyalty also comes down to evaluating a customer’s monetary worth, expressed as customer lifetime value. CLV, as defined by the American Heritage Dictionary of Business Terms, is “the [predicted] economic value of a customer during the life of the customer’s association with a business. An estimate of customer lifetime value allows a business to determine the amount of money that can be spent on acquiring and retaining a customer.” In my view, however, this definition is only partially accurate. I define CLV as the total amount customers could spend over time if brands removed transactional barriers to enhance customer engagement.
Smartphones = smart engagement
Mobile’s ability to simplify transactions is only the beginning of its CLV potential. It’s also the ideal social media tool. Whether it’s Facebook, Twitter, Instagram, Pinterest, or through instant messaging apps like Kik and WhatsApp, social mobile apps can help brands to learn about their customers’ interests, servicing them at every moment of their lives.
Consider a 22 year-old millennial, part of a generation that spends 14% more time on mobile devices per week than any other age group. Properly engaged, that individual could be a customer for decades, no matter what industry we’re discussing.
The airline industry is one of the clearest examples of how mobile helps maximize CLV. Airlines are moving beyond apps that simply allow passengers to book flights or check the status of their accumulated rewards points. Instead, they’re starting to link their mobile engagement tools with seatback display screens and entertainment systems, while flight attendants are using tablets to discern passengers’ wants and needs before they even board the plane, based on past interactions.
Customer lifetime value done right
With the above in mind, here are three simple, yet important, pieces of advice for marketers to consider:
- Don’t tear customers away from the engagement path/s they’re already on.
- Engaging customers doesn’t mean convincing them to give up their bottom dollar. Focus on providing loyalty experiences that make customers more likely to spend their money at your business versus somewhere else.
- Don’t make engagement more difficult. Make it convenient and focus on maximizing those coveted consumer “in-between times.”
For instance, if a customer wants to purchase an item while walking to a meeting, then make this mobile experience less onerous; for example, make the verification process shorter and less cumbersome. Sometimes a customer will forget a first pet’s name from when they were six-years-old and they don’t want to be bothered with remembering excessive minor details.
Ultimately, customer lifetime value isn’t just marketing jargon. It’s based on an actual formula. Rather than relying on traditional calculations, (summing up how much a customer spends across all channels and using that as a predictor for future worth), I suggest employing the Fader-Hardie model, Probability Models for Customer-Base Analysis. Based on the work of professors Peter Fader and Bruce Hardie, this business model considers expected customer lifetime value a potentially richer dataset than past transactions alone.
As a portable social media gateway, mobile is an excellent metrics-gatherer and brand educating device. And, increasingly, it’s the platform where loyalty programs must exist if they are to excite—and retain—customers.
It’s time for brands across all verticals to once again become fixtures in their communities—not by recreating yesteryear’s connections, but by embracing the latest mobile technology has to offer. Properly engaged, consumers of all ages stand to become customers for life—the ultimate marketing goal. Now is the time to begin courting their loyalty.
Michael Hemsey is president of Kobie Marketing.