The Chief Marketing Officer (CMO) Council has published a new report – Humanizing & Analyzing Relationships To Drive Revenue, Retention And Returns – detailing the challenges and best practices for segmenting customers and defining, measuring and tracking customer lifetime value (LTV).
The insights are based on a survey of over 150 brand leaders and in-depth interviews with executives from Informatica, PepsiCo, Electrolux and RedBubble.
LTV is an indicator of how well a company identifies and nurtures profitable, long-term customer relationships. The report highlights the importance of understanding LTV in order to inform strategic business decisions and marketing budget allocation and suggests that, as things stand, there is an opportunity for many organisations to improve:
- 47% of marketers track LTV slightly well or not well at all.
- 68% rate their LTV-to-CAC (customer acquisition cost) ratio as average, below average, or very poor.
- 44% are slightly effective or not effective at segmenting and targeting customer sets with the most potential for long-term value.
Donovan Neale-May, Executive Director of the CMO Council, said: “More sophistication with LTV can help companies focus their marketing programs and budgets and respond to shifting markets. Our study found that a majority of CEOs, chief revenue officers, sales leaders and line-of-business executives want to see quarterly LTV to help them make better strategic decisions.”
The report, produced in collaboration with Deloitte Consulting LLP, identifies the biggest challenges to calculating LTV as:
- Aggregating the right data for a robust view of the customer.
- Shifting from assumptions to predictive knowledge of the customers’ needs.
- Identifying the moments of opportunity to deliver delight and differentiation.
- Listening for customer cues beyond how they respond to an engagement tactic.
- Meeting the customer in real-time.
The research suggests brands wanting to grow LTV should take a hard look at how they’re segmenting and targeting customers. Done improperly, a brand can end up wasting resources chasing the wrong customers. The survey found many marketers (84%) are only moderately effective or worse at segmenting and targeting customer sets with the most potential for long-term value.
Donovan Neale-May, the Founder and Executive Director of the CMO Council, is an upcoming guest on our new podcast series CMO Confidential.