It’s Time To Redefine Customer LTV
This post was originally seen on SalesTechStar.
Think, for a moment, of the phrase “lifetime value” (or LTV). The term has been in marketers’ vocabularies since the dawn, of well, marketing. Upon hearing it, we immediately think of the term in an economical sense. Customer LTV, by definition, describes the total revenue a business can expect from a single customer account.
But that view is shifting.
LTV is about more than how much a customer purchases. Forrester explains that customer LTV should be measured as the sum of a customer’s expected spend, plus the influence they have on others to also make purchases.
This is especially important today, as getting customers to buy more has become harder than ever. Consumers are overwhelmed by choice and information, and sometimes, there’s a natural maximum of what they can spend with a single brand.
On top of that, customer acquisition is getting more expensive due to rising ad prices. Brands must focus less on transactional marketing via ads, emails, and other channel communication, and more on active community engagement through in-person events, small group discussions, and the like.
The smartest brands overcome this challenge by turning customers into advocates. They activate these trusted sources to organically generate interest among their target audience. As more brands come to realize the true value of their customers, they will need to find ways to engage and nurture relationships with their community of enthusiasts.
Customers hold more power than ever
Authenticity is key to good brand building, yet extremely difficult to achieve by in-house marketing teams alone.
Why? People don’t trust corporate brand messages and ads. Now more than ever, people trust other consumers who have personal experiences with the brand and honest opinions to share. What’s even better is when consumers can be part of the brand building process.
Brands need to reach out to their most loyal customers and turn them into trustworthy advocates. As we look ahead, authenticity will come from customers who are passionate enthusiasts of the brand. These are people who:
- Purchase goods time and time again
- Engage with brands on social media
- Give great feedback brands can incorporate into future products
- Spread word of mouth buzz and inspire others to trust the brand
With their help, brands can create a holistic story with perspectives from every angle and build a strong community of advocates who build buzz about the brands they love.
Engaging customers through community-building
The key to building a strong community is to engage enthusiasts in personalized ways to help spread the brand’s mission. For example:
- Ask influencers to lead intimate discussions on social media on the brand’s behalf, so community members can build relationships with each other around a shared interest.
- Invite community members to online or in-person events, which brings people together and forges deeper connections.
- Respond to comment threads, reviews, direct messages, and emails in a human way to show consumers that the brand is actively listening and incorporating their feedback.
Measuring customer LTV in the future
While we’ve provided actionable ways to build a tight-knit community, the tools required to activate these strategies and measure results are limited.
In a community-centric world, brands need intelligence to track the payoff of the activations mentioned above. This includes both quantitative and qualitative metrics, such as:
- Reach and awareness: How much a brand is mentioned on social or in real life.
- New customer acquisitions: This will happen as more community members recommend a product.
- Activities: How much customers interact with your brand and other customers through online and offline communities.
- Buying behavior: Retaining customers — and persuading them to buy more than once — results in more loyal, longer-lasting relationships.
Going forward, marketing technology needs to provide more ways to measure community engagement. Without keeping a pulse on these metrics, brands risk losing the personal touch customers demand.
Today, customer LTV is defined by not just how much customers can purchase, but how much they influence others to purchase by referring friends, writing reviews, improving product quality through feedback, and generally embodying your brand. Customer value is more complicated now, yes, but customers can be the most powerful members of a brand community — and it’s time for brands to recognize that value and maximize it.