Customer lifetime value—why brands should focus on their best customers to improve holiday growth

The Salesforce Shopping Index, which pulls data from a majority of the top 30 U.S. retailers, anticipates flat year-over-year holiday spending in 2023. That’s not catastrophic news in a hard-to-predict economic landscape, but it does mean there will be a whole lot of advertisers striving to hit targets when growth is relatively tough to come by. There are a few ways to approach this. The “easy” ways—which might be good for the top line at the expense of the bottom line—are to outspend the competition or offer steep discounts and aggressive promotions to acquire customers. But advertisers that go that route are ignoring an underutilized strategy that has the potential to dial up revenue while preserving budget and margins: focusing on their highest-lifetime value (LTV) customers. Getting started Doing this right depends on the integrity of a brand’s first-party data. A clean CRM set-up will enable a marketer to segment its customer base into LTV segments (with the most valuable being “high purchase price” and “high purchase frequency.”) Ad Age Media Summit Hear from industry leaders during October event in NYC Register here After identifying these segments, the next step is to crunch data to find geographic, demographic and interest trends. Brand managers should talk to their customer service teams or consider doing focus groups of high-LTV users to find themes and topics that go beyond CRM data to address in marketing campaigns. (Such insights should be embraced beyond Q4 to keep the brand attuned to customer challenges and priorities as they evolve.) One example of this is Volvo, which has developed a brand aligned with the priorities of its repeat purchasers: families with disposable income looking for safe, high-quality vehicles they can drive for many years. Build a high-LTV base Meta, TikTok, and Google, which have similar audiences, have robust lookalike targeting. Depending on a brand’s revenue goals and budget, it should use its current high-LTV segments as a base for finding more customers like them. Start narrow and test increasingly broad lookalike audiences, with offers that reflect the insights gained in the research stage, before Q4’s engagement prices rocket up. Brands with bigger budgets and a more robust tech stack can use providers versed in predictive LTV to acquire new high-value customers through third-party AI, agnostic of the ad channel. Reengage high-LTV customers in Q4 In the rush to acquire new customers in Q4, don’t lose focus on maximizing the value of existing customers, particularly the highest-LTV base. High-LTV customers should be approached differently from the customer base in general. They’ve already proven some level of brand affinity—particularly customers with a history of frequent purchases—so don’t default to discounts and steep promotions, either specifically to this audience or broadly across the entire site. However, use targeted campaign promos to pull in lower-LTV users interested in discounts for excess or clearance inventory. To play on high-LTV customers’ brand affinity, consider exclusive offers, loyalty programs, limited product drops, pre-release access to new products and even paid membership programs with concrete benefits—which have been proven to increase engagement (think Amazon Prime). Communicate proactively None of these tactics will inflate new-customer acquisition numbers—that is to say, if Q4 KPI is volume of new customers acquired with no further nuance, focusing on higher-LTV customers won’t help blow those numbers away. But if working within budget constraints or wanting to maximize long-term return beyond Q4, an LTV play is a smart one. Just make sure the strategy is communicated and aligned with all stakeholders in advance, and that all parties are tracking KPIs that will show the value of the work. Ad Age A-List & Creativity Awards Final deadline approaching for annual program Enter here

Customer lifetime value—why brands should focus on their best customers to improve holiday growth

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