It is a two-way street in business. As customers have a better say in the customer-brand relationship, Customer Lifetime Value (CLV or CLTV) becomes the bugle call for success, defining in the way it can guide brands keep customers at the core to drive business and revenue growth.
CLV has the irresistible lure, sending out signals for businesses to bolster long-term customer relationships, optimize acquisition spending, prioritize customer segmentation and customer retention. Is Customer Lifetime Value missing out on the most significant brand component that has a bearing on CLTV?
Reimagining ways to ‘add value to customers’ is about putting the best foot forward to delight customers with value in terms of functional, emotional and social elements, and lay the course for building the roster of loyal customers.
Should ‘Value Offered’ to Customers Precede Customer Lifetime Value?
Businesses thrive with profitable customers. CLTV model guides businesses in making smarter decisions in terms of making investment across customer experience, marketing and sales. Getting CLTV off the ground means identifying drivers that have a say in enabling maximum customer profitability. Some of these drivers include:
- Past spending level
- Past-purchase activity
- Cross-buying behavior
- Customer returns
- Average inter-purchase time
- Deals/discounts/coupons intensity
This is about looking at CLTV from a ‘Business’ perspective, meaning the focus is on how the business profits from what the customer did, or what the customer is likely to do. Rather, with an outward focus, beginning from knowing what values offered by a brand makes customers tick, how customers perceive values offered by a brand, gives businesses the edge to leverage Value Offerings to Customers across functional, emotional and social areas to improve value and win customer loyalty as well as sustained revenue growth.
In effect, CLTV will get the boost it needs if brands turn their focus on how customers perceive values offered by them, take note and devise means to deliver more value, strengthen areas of weakness and ride on top of the positive Value offerings.
What’s this ‘Value Offered’ by Brands?
A banking customer opining that it was a ‘secure investment returns’ as when the customer sought the services of the bank to invest in mutual funds brings in ‘risk reduction’, time saving’ ‘effort saving’ and ‘hassle-free’ elements into the customer speak. In other words, those were the values that the customer acquired from the bank. As the customer realizes values offered by the bank, there is more business flowing from the customer and greater the chance for the bank to win a loyal customer.
When Mark is adorned with the elegant wedding suit, he becomes the center of attraction. Here value offered by the brand is perceived through ‘Self-actualization’ ‘Quality’, ‘Attractiveness’ and ‘Reward’. Chances are that Mark turning into a ‘Word of Mouth’ ambassador for the brand will trumpet the brand’s top quality. In both instances, customers acquire values offered by a brand through functional and emotional elements – Value offered to nurture loyal customers.
Extending ‘Value Offered’ to Customer Segmentation, beyond Customer Lifetime Value?
Value to customers breeds customer value. Before getting to the CLV based score and CLV based actions, turning the lens on ‘Value Offered’ to customers guide businesses to know where they excel and where they lack the punch. It is about travelling the introspective path to understand how functional, emotional and social elements associated with the brand offer value, where businesses fail to touch the chord with the customer and what strongpoints work in favor of businesses.
Infusing this ‘Value offered’ dimension into Customer Segmentation can strengthen the chances of businesses to improve their value offerings, target right customers with the promise of right value that would delight them – in turn increase the flow of loyal customers.
Let’s say we use functional and emotional features perceived as values to create a customer segment, which is differentiated by the need to have faster deliveries, top quality, risk-free transactions, easy access and hassle-free customer service. The brand can get closer to this segment by scoring high on all the demands, working its way by improving areas that failed to inspire confidence in the customer and by using strongpoints to its advantage. This is the precursor to improve the ‘status of the customer’ to a loyal customer.
What’s Data related to ‘Value Offered’ to Customers?
Data supporting value ‘perceived’, ‘acquired’ by customers can be collated from feedback forms. Customer service calls also serve as an inspiring source to look for indicators that point to values promoted by functional and emotional features. Data from social media can also point businesses towards the ‘offer dimension’ in terms of functional and emotional features discussed by customers. Conducting a survey is another way to understand where a brand stands in terms of offering value to customers, what customers believe to be the ‘best value’ offered by brands and what caused customer disappointments.
Customers become valuable with a higher Customer Lifetime Value not just by buying more, buying at a regular frequency and spending more – Customers’ value increase when they feel enriched using a brand, try new products introduced by a brand, becomes the word of mouth ambassador for the brand. In short, Customer Lifetime Value paints even more a healthy picture when brands work their way from tracking values offered by brands to customers.