Last month, Tommy Lamb, Head of Lifecycle Marketing at WITHIN and former Director of Retention at TheRealReal, SEPHORA, and Teleflora, shared how marketers can easily orchestrate content and personalization across the customer lifecycle to drive growth.
Tommy presented the power of customer retention over acquisition for increased LTV by answering the question: What steps can you take to maximize the effectiveness of your owned channels and improve revenue?
If you missed the event, you can watch it here.
Brands typically have teams that manage acquisition by working on search, social, display, and other digital campaigns. This can lead to inefficiencies, as teams scramble for budgets between Facebook, Google, and TV.
Inconsistent messaging across channels, including a brand’s own website, ultimately leads to a fragmented customer experience even before the first purchase.
Owned media and retention teams often fight over attribution and touchpoint incrementality, which leaves the consumers overwhelmed by excessive messaging (three emails a day in some circumstances), out-of-touch SMS messaging, and a loyalty program rewarding the wrong type of behavior.
How do brands solve this problem?
By leveraging a concept called relationship marketing.
Relationship marketing is not about paid, owned, or brand. It’s about developing a genuine relationship with the customer.
Brands that use relationship marketing fuse creative performance, owned and paid, so that they adhere to branding practices, but also focus on performance metrics before and after a purchase.
“It’s not brand, it’s not paid, it’s not owned. It’s about developing that relationship with the customer.” – Tommy Lamb, Head of Lifecycle Marketing at WITHIN.
KPIs and metrics that vary across teams typically aren’t aligned with a brand’s primary goal: long-term profitability.
Most companies, use new customer acquisition, retention, or revenue as primary KPIs. But your brand’s marketing performance will be more streamlined when it is guided by a north star KPI.
The issue with CPA as a goal for customer retention is that it doesn’t take into account the quality of the customer. CPA doesn’t consider margin rate, repeat purchase rate, or potential halo effects in promotions.
Your brand needs to identify the most valuable segments to center marketing efforts around attracting and retaining these customers.
Retaining customers is 5 to 8 times less expensive than acquiring customers; you still need to pinpoint the 20% of customers that drive 80% of revenue.
Which brings us back to the question of performance metrics.
Revenue optimized ROAS as a metric is one step better, because it takes into account the dollar amount of the order, but it still doesn’t consider repeat rate or margin.
LTV, or lifetime value, is the ultimate KPI because it centers on the entire potential profit stream of the customer.
However, it can be challenging to get everyone on your team to buy into the idea of LTV, especially for paid media and branding efforts. LTV can be difficult to measure, hard to optimize for, and overall seem intangible without proper calculation capabilities.
Watch the full webinar recording here.
“LTV or long-term profit is the gold star KPI as it’s forward-looking at the entire profit stream of the customer.” – Tommy Lamb, Head of Lifecycle Marketing at WITHIN.
First, you need to organize customers that may look the same because they made the same first purchase. You can separate customers based on more granular measurements such as purchase history, acquisition channel, engagement signals, how they are interacting with customer service teams, or even NPS scores.
Additionally, you can compute LTV customers based on whether they shop at a discount, if they buy full price, and any demographic or psychographic data accessible.
You then use these data points to project how much that customer will likely spend with the brand over a specific period of time, usually between one and two years.
Here’s a fictional example to illustrate this point…
Let’s say that Shane and Olivia have both purchased from your brand. Shane has a much higher LTV and repeat purchase rate, so your focus should be on acquiring and retaining customers like Shane.
What most brands get wrong is that they stop at analysis and move into actual implementation based on these personas.
Want an action-packed guide to attracting, acquiring, and retaining high LTV customers? Check out our Free eBook on Lifecycle Marketing for more!
Finding your high LTV customers starts with strong attribution capabilities. Your brand should be able to evaluate the impact of every touchpoint, channel, and device a user interacts with on their path to purchase.
Going back to our examples of Shane and Olivia, Shane has a very different LTV and also a very different path to purchase than Olivia. Our goals are to weigh those channels appropriately and start to figure out where we can scale.
Take a paid media example: If Olivia ran a branded search on Google for Nike Jordans before making a final purchase and we attribute the sale with branded search, the attribution doesn’t take into account all of the interactions that Olivia has had with Nike leading up to the search.
And then a retention example: If a customer receives an email or SMS from a brand offering 25% off denim, then they drive to the store and make a purchase, the store gets all the credit, while online doesn’t.
To remedy issues with attribution, you can bring in media mix modeling, multitouch attribution, and incrementality testing capabilities.
If you’re ready to take your LTV efforts to the next level in 2022 and beyond, talk to us at WITHIN. We help the world’s most prominent brands like Nike, Shake Shack, and Casper maximize the value of their marketing across channels.
Chris Chan is a content writer at WITHIN.