The customer lifetime value, which for a long time tended to be much more frequent in dissertations than in reality, is finding its way into practical application. The driving force is, in particular, the digital economy. The increasing distribution of the customer lifetime value opens up great opportunities for a targeted acquisition and management of customer relationships. However, it also exposes the fact that certain misunderstandings are widespread. For this blog, we have collected a few of them and contrasted them with the facts.
Rather not. The customer lifetime value is not the big simplifier for which it is sometimes taken. It sums up the expected turnovers with a customer within a certain period of time, which can vary from a few weeks up to several years according to application and industry. Thus, it provides good services for the evaluation of distribution channels or the measurement of the long-term success of marketing measures. In this process, it will at best modify but not displace older marketing key figures. Due to its name, the customer lifetime value virtually invites connotations with the most diverse ideas of customer value. Anyone wishing to effectively work with the customer lifetime value, however, may not use it as projection surface for his/her own ideas of customer value. As for any other key figure, it is the definition, which specifies the interpretation possibilities, not the name.
This would be a good example of how one can make the wrong decision based on the right key figure. A customer group with a high customer lifetime value certainly is pleasing. However, that does not allow any conclusions on whether this may be further increased by means of marketing measures. However, these are the central questions of a direct marketing strategy based on the customer lifetime value: How can the customer lifetime value be increased? By means of which measures? For which customer group? These questions can only be answered by means of experiments. More precisely: by means of test campaigns and a control group based success measurement.
Of course, you can also introduce a Customer Lifetime Value in the first step. However, you then have to live with the fact that the possible applications are limited to sales channel management. In many business models, this is a very important and profitable application that may well be sufficient at first. However, in order to derive the full benefit from customer lifetime value, it must be combined with a campaign success measurement system that works with verifiably reliable statistical methods. In the planned development of data-driven direct marketing, it is therefore advisable to start with the processes for measuring success, which in themselves already make a high value contribution.
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Domain Lead Customer Engagement & MarTech
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