If you’re responsible for marketing your brand online, there’s a good chance the ROI question occupies a lot of your day (and, probably, a fair amount of your evenings). How do you best measure return on investment in paid media, content marketing, SEO and social media? Every brand and scenario is different, and there’s no easy answer, but you can save yourself a lot of time and calcium chews by asking yourself this simple question: Are we considering customer lifetime value (LTV) in planning and measuring our online marketing strategy?
If your answer is an easy “Yes,” congratulations. You’re ahead of the curve. Stop reading and go watch a cat video, or something.
If you said, “No,” or you’re not really sure, don’t worry and keep reading. Your job is about to get easier.
Why Consider Lifetime Value in Online Marketing Decisions?
There are a lot of different ways to calculate LTV and even more ways to apply it to your digital marketing strategy, but the important thing is this:
Lifetime value provides insight into long-term success, giving you and your brand a more holistic perspective and, ultimately, stronger return on your marketing investment. Among many other things, understanding LTV means better:
Market Segmentation — The renaissance in data-driven marketing means brands and agencies alike are parsing, distilling and applying data to everyday decision-making like never before. Leveraging advanced tactics like CRM retargeting and “lookalike” audience targeting, brands can focus media spend on high-value customer segments. But success in applying Big Data is all about perspective. And while standard customer valuation metrics like conversion rate and average order value (AOV) are tremendously important in short-term decision-making, long-term success in digital marketing requires a more holistic assessment of your customer segments. By calculating and comparing lifetime value among different customer segments, you can improve cost efficiency, increase long-term revenue and maximize ROI.
Customer Retention — Advanced targeting options and prospecting technologies make digital channels ideally positioned for new customer acquisition but, even accounting for popular retargeting, many brands lose sight of other important, long-term objectives like customer retention and frequency. As online users grow increasingly search-savvy and discriminating, the most successful brands will be those who forge meaningful, lasting relationships with their customers. Including lifetime value in your digital marketing strategy will help ensure that objective stays front and center.
Media & Budget Planning — We’ve come a long way, but the Internet remains the Wild West of advertising, and brands get itchy trigger fingers in the quest for gold. And who can blame them? Under the right circumstances, channels like paid search can drive short-term revenue faster than any other. But far too many pioneers loaded the wagon without a checklist, and many brands fail to take a long-term view in media and budget planning. It takes patience, but including customer lifetime value in your projections and planning process can greatly increase long-term ROI on your digital marketing investment. With the rise of customer and content-focused inbound marketing, considering LTV can help brands ditch traditional and increasingly ineffective “blast” campaigns, focusing instead on nurturing relationships and growing residual revenue. BONUS: With CEOs and CMOs struggling to make sense of a deluge of analytics data, LTV can also make justifying marketing investment to your boss a lot easier, too, combining short and long-term revenue projections.
Are you accounting for customer lifetime value in your digital marketing strategy? Is your agency? Give us a call if you’d like to talk about a holistic marketing strategy for your business, or download Oneupweb’s free whitepaper on data-driven marketing: