Four Steps to Maximizing Customer Lifetime Value

Customer lifetime value (CLV or CLTV) is the most underappreciated B2C metric.

“Underappreciated, you say? We measure customer lifetime value, and it’s really important to us!”

Sure it’s a common metric, but why is it important to your business?

Most B2C marketers use customer lifetime value as an input to determine how much is reasonable to spend to acquire a new customer—customer acquisition cost (CAC). But for top-performing B2C companies in the world, CLV is the metric on which business decisions are made.

Here’s why:

  • It’s a faster path to revenue.
  • It’s an easier path to revenue.
  • For both reasons above, it’s a more profitable path to revenue.
  • And, of course, it justifies increased spend on customer acquisition.

Unfortunately, even in a world where it costs five times more to acquire a new customer than it does to keep current customers, online retailers and other e-commerce businesses are continuing to invest nearly 80% of their digital marketing budgets on customer acquisition, and just 42% of businesses are currently even able to measure customer lifetime value, let alone accurately. Those two stats are more closely related than they seem at first glance.

By simply using some rough approximation of customer lifetime value to justify acquisition spend, companies are focusing on the wrong side of the equation. What they don’t realize is that investing in maximizing CLV is indeed the most profitable—and, increasingly, the fastest—path to revenue growth.

Consider, for example, that for each 1% of shoppers who return for a subsequent visit, overall revenue increases approximately 10%. That means if online retailers retained 10% more of their existing customers, they would double their revenue. Here’s another way of looking at it: Reducing your customer defection rate 5% can increase your profitability 25% to 125%.

Growing revenue by driving up customer lifetime value can also be viewed as the easiest way to do it. Though customer marketing is complex, technology is making it incredibly more manageable and effective. For example, the probability of selling to a current customer is 60-70%, on average, whereas the probability of selling to a new shopper is 5-20%… not to mention returning customers spend on average 67% more than first-time customers!

So if growing customer lifetime value is so fast and easy, why isn’t every B2C marketer talking about it?

The reality is that although increasing CLV is, for most businesses, generally a faster, easier, and more profitable path to revenue, it takes a significant shift away from the traditional marketing focus on volume and a re-focus on the quality of every customer interaction.

Read more at Here’s the good news

My point of view:  Customer Lifetime Value was introduced to me early 2000 by Rust and Zeithaml. Considering the fall of long term relations and the rise of encounters lifetime value got another relevance: what’s the customer encounter (or series of encounters) worth. And even important do you measure it at an individual level or at the level of a target group.

Strategy Making: How to Tap the Wisdom of the Crowd

Even firms that typically prefer to centralise decisions needn’t miss out on the benefits of opening up their strategy making.

Strategy making has traditionally been the purview of the top management team. Leaders in the inner circle of organisations pride themselves in being the architects of their plans. Open strategy is a more recent concept that consists of involving a wider community in the exercise. Benefits are well known. For instance, ideas can be drawn from a larger, diverse pool, and giving staff a voice can boost their commitment. Despite these advantages, open strategy remains an acquired taste for many top-down strategic planners.

However, unless a company has an absolute dream team at the helm and a stellar track record to show for it, it can be hard to oppose the trend towards openness. The question becomes how to manage the community-focused process, especially in centralised organisations, where control tends to be concentrated in the hands of the few.

In our paper, Opening Up: How Centralization Affects Participation and Inclusion in Strategy Making, we show that open strategy can be carried out in both centralised and decentralised firms, albeit following different recipes. To better understand the differences, we suggest drawing a distinction between the practices of participation and inclusion that underpin the process.

Open strategy via participation and inclusion

A wide range of people can have a stake in a firm’s strategy. These include the staff, of course, but also customers, activists and even trade journalists, among others. There are two main ways to engage them when setting corporate strategy in an open fashion. The first one is called participation and the second, inclusion.

Participation is about increasing stakeholders’ input to inform strategy decisions. Relevant activities include surveys, interviews and any other information gathering. They consist of one-off transfers of knowledge – similar to the passing of a ball.

Inclusion is about creating and sustaining a community of stakeholders tasked to look into an ongoing stream of strategy issues. Prime examples are work groups and task forces. These communities come together to share ideas and decision making over a period of time.

Two company vignettes

Our paper describes how two public companies – one centralised, the other less so – engaged in open strategy to define their responses to the e-commerce revolution of the mid-1990s. These vignettes illustrate how a firm’s degree of centralisation affects participation and inclusion in strategy making.

Taking into consideration the two phases of strategy making – alternatives generation and idea selection – the differences can be schematised as below:

 

Open strategy in a decentralised company

At HealthCo, a large decentralised healthcare company, inclusion was practised on a large scale in the first phase, as 80 employees and other stakeholders were asked to collaboratively think up ideas for the firm’s internet business. Participation (e.g. basic input-gathering) was present, but limited to a focus group involving customers and strategic partners.

Read more

My point of view: Open innovation was, is and will probably the best approach to gain benefits for many organizations. This post challenged me because of the use of open strategy. For me it more about the use of insights from the outer world to improve the internal process of strategy making (and even more important doing).

Fascinating marketing automation report 2016 from boldigital

The total number of websites using marketing automation technologies in 2016 was 482,765
The 6 dominant technologies are installed on 276,437websites

MARKETING AUTOMATION MARKET DISTRIBUTION IN 2016

Out of the 6 dominant technologies, HubSpot had the largest market share in 2016. However, it’s important to understand that each solution offers different pricing and features and is suited to different types of companies. For example, Marketo is typically a better fit for enterprises while HubSpot is typically a better fit for medium sized companies. This could explain the reason HubSpot has a larger market share than Marketo.

The 6 biggest technologies currently hold over 57% of the market share
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WHAT INDUSTRIES USE MARKETING AUTOMATION

Industry Percentage of Market
Business & Industry 40.69
Internet & Telecom 8.97
Computer & Electronics 7.32
Health 6.73
Arts & Entertainment 5.63
Career & Education 4.93
Shopping 4.84
Pets & Animals 4.78
Finance 3.79
Sports 2.29
Travel 1.86
People & Society 1.66
Law & Government 1.24
Industry Percentage of Market
Autos & Vehicles 1.03
Food & Drink 0.92
Beauty & Fitness 0.72
Science 0.70
Adult 0.44
Recreation & Hobbies 0.37
Games 0.31
News & Media 0.28
Home & Garden 0.17
Books & Literature 0.16
Reference 0.09
Gambling 0.05

Marketing automation is most popular among B2B companies. This comes as no surprise as marketing automation is very useful in cases of complex sales cycles and long decision making processes (properties that are very characteristic to B2B companies).

ADOPTION PER REVENUE TIER

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The following break down displays the distribution of technologies by company revenue tier. Surprisingly, there isn’t a clear distribution between SMBs, mid-markets and enterprises.

Yearly revenue/ websites installing technology Act-On Eloqua HubSpot Infusionsoft Marketo Pardot
0-1M 3764 2879 34181 28150 12935 9276
1M-10M 686 107 9384 4929 2195 1070
10M-50M 1683 388 7626 614 10063 3854
50M-100M 462 169 1563 114 5947 1062
100M-200M 244 160 848 54 1098 570
200M-1B 210 337 1661 66 1499 644
1B+ 145 352 538 79 1458 514

Act-On and Pardot have a rather constant market share across all tiers.

Eloqua becomes more dominant among companies with larger revenue.

HubSpot is very dominant among SMBs. However, as the revenue tier raises, HubSpot’s domination decreases. There’s an anomaly in companies with yearly revenues between 200M-1B. In such companies, HubSpot it the dominant tool. A possible explanation could be an effort that HubSpot is making to bring such companies on board.

Marketo is scarce among SMBs, but becomes a dominant technology in larger companies. Aside from the anomaly in 200M-1B, Marketo is hands down most dominant in companies with a revenue of 1B and above.

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1M-10M

Among companies who generate between 1M-10M USD in yearly revenue, despite being a rather small player, Infusionsoft surpassed Marketo in this market share. This might be the target market for Infusionsoft since we hardly see any usage among bigger companies.

10M-50M

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100M-200M

200M-1B

The HubSpot anomaly discussed above is reflected in this chart where more companies with a yearly revenue tier of 200M-1B, choose HubSpot over Marketo.

>1B

For companies who generate a yearly revenue of 1B and up, Marketo is way ahead of other technologies. Marketo has a reputation for being the popular solution among enterprises – the data backs this reputation.

DISTRIBUTION PER TRAFFIC VOLUMES*

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Monthly visits/ websites installing technology Act-On Eloqua HubSpot Infusionsoft Marketo Pardot
0-10,000 9376 3580 75856 39586 3769 28749
10,000-100,000 936 837 5687 2531 3272 1830
100,000-500,000 206 319 1201 463 1291 484
500,000+ 58 212 333 96 738 177

*Traffic data extracted from SimilarWeb

WEBSITES WITH 0-10,000 MONTHLY VISITORS

WEBSITES WITH 10,000-100,000 MONTHLY VISITORS

WEBSITES WITH 100,000-500,000 MONTHLY VISITORS

WEBSITES WITH 500,000+ MONTHLY VISITORS

DISTRIBUTION PER GEOLOCATION

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Country/ websites
installing technology
Act-On Eloqua HubSpot Infusionsoft Marketo Pardot
5327 1556 35376 9546 27107 14783
475 160 2562 1170 761 742
257 77 2231 637 701 655
93 115 898 779 1082 259

There are dramatic changes between the different players when it comes to geographic distribution.

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UNITED STATES

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UNITED KINGDOM

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CANADA

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AUSTRALIA

FURTHER BREAKDOWN OF EACH TECHNOLOGY PER LEADING GEOLOCATIONS

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Country/ websites
installing technology
Act-On
United States 5327
United Kingdom 475
Canada 257
Netherlands 141
Australia 93
Germany 63
India 63
Country/ websites
installing technology
Infusionsoft
United States 9546
United Kingdom 1170
Australia 779
Canada 637
New Zealand 93
Mexico 48
Brazil 47
Country/ websites
installing technology
Pardot
United States 14783
Poland 2910
United Kingdom 742
Canada 655
Norway 397
Australia 259
Japan 167
Country/ websites
installing technology
Marketo
United States 27107
Australia 1082
United Kingdom 761
Canada 701
Sweden 532
France 307
Japan 237
Country/ websites
installing technology
Eloqua
United States 1556
United Kingdom 160
Australia 115
Canada 77
France 62
Germany 52
Netherlands 41
Country/ websites
installing technology
HubSpot
United States 35376
United Kingdom 2562
Canada 2231
Australia 898
Germany 789
Netherlands 434
Spain 417

All technologies seem to be directing most of their market penetration efforts in the English speaking markets. Pardot has identified an opportunity in the Polish market. Marketo have planted seeds in the Japanese market while Infusionsoft is penetrating South American countries. Across the EU we didn’t identify one dominant technology. It will be interesting to see if that changes in 2017.

MARKET GROWTH IN 2016

GROWTH IN 2016 PER TECHNOLOGY

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Marketing Automation technology Percentage of growth in 2016
Pardot 108.9%
HubSpot 50.9%
Marketo 48%
Act-On 45.5%
Eloqua 44%
Infusion-Soft 44.3%

The general growing interest in marketing automation reflected on Google Trends is proving to reap fruit among the technologies. Pardot has seen the largest growth in 2016 with an amazing increase of 108.9%. The rest of the players grew between them by an average of 48%.

“Companies who use this also use”

There is a trend among different tools that are used alongside different technologies. Here’s a breakdown:

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Companies who have Act-On installed typically have another technologyinstalled alongside (e.g. Pardot/ HubSpot).

Most companies who have adopted marketing automation technologies are also using media buying tools. The connection between use of automation and media buying tools is simple: these sites are more mature when it comes to digital, using multiple technologies and tools within their marketing arsenal to optimize visits, retention, engagement and conversion.

 Related articles

Will this be your guide to persona’s

A guide, not a template

The first thing a good UX Designer should tell you about creating a persona is that if you just blindly follow a template, you have missed the point. User research should inform the layout — don’t let the layout constrain the research.

Put simply, don’t just follow a template.

Sadly, this advice is not very helpful when you are starting out, staring at a blank sheet of paper trying to create a set of personas.


‘Isn’t making a persona a waste of time? What’s the point?’

Personas are all about building empathy amongst your team. Great software gets made when the people who make it care about the people who use it.That means during every meeting, when making any decision, in every design and with every line of code, you should first be thinking about your users.

This can be difficult to do: out of sight, out of mind. We are busy, we are in offices, we have deadlines, and our users are somewhere we are not. Printing out personas and hanging them on the wall is an excellent way to keep our users in sight and in mind.

Your users don’t go away just because you decide not to look at them.

So no, personas are not a waste of time!


‘Where should I start?’

Get out of the building (GOOB) and talk to your users!

There are lots of different techniques you can use, and I detail some of the key ones in a previous article here:


‘What should I put in a persona?’

To answer this question with a question: what is it about your users that your team should know, remember and reflect on every day?

To answer your question in a more detailed (and longwinded) way, I have put together this worksheet that I use to guide my research:

Persona Worksheet

To get started, you can download the PDF here.

Read all here

Ascend2 State of marketing automation report 2017 free download

Survey report “State of Marketing Automation

Ascend2 just published its survey report “State of Marketing Automation”.  The company conducted the report in partnership with leading marketing solution providers. The  research-based marketing expert defines marketing automation as “software applications designed to streamline repetitive marketing tasks”. Ascend2 highlights in its report that the technology has become ubiquitous across all industries.

Most important for Ascend2 was to find out what strategies are having the most impact on the state of marketing automation this year.

Here are their findings:

  • Strategic objectives:
    While increasing marketing ROI is an important objective for the largest share of marketing influencers (46%), optimizing productivity and acquiring more customers are a close second with 45%.
  • Success of strategy:
    One third (33%) of marketing influencers consider their marketing automation strategy very successful at achieving important objectives, describing it as best-in-class. 51% consider their strategy somewhat successful while the other 16% are still struggling to achieve success
  • Critical challenges:
    There are many challenges competing for the top spot, however, measuring performance is a most critical challenge for 41% of marketing influencers
  • Sales cycle encounter:
    A total of two-thirds (67%) of the respondents encounter a complex sale with a long cycle and many influencers during their marketing. The complex sale is the sweet spot for marketing automation. However, one- third (33%) of influencers automate marketing processes for direct sales.
  • Objective vs. challenges:
    The greater the gap between the importance and the challenge of achieving an objective (optimizing productivity, for example), the higher the priority it should have in the development of a successful marketing automation strategy.
    ascend1
  • Evaluation criteria:
    A majority (54%) of marketing influencers point to ease of implementation as an important evaluation criteria for selecting a marketing automation system. Ease of implementation is more important than even the cost of ownership, making it the subject of the following survey questions.
    ascend2
  • Implementation

  • Implementation complexity:
    A total of 84% of marketing influencers perceive the implementation of a marketing automation system to be a complicated task, with more than a quarter (26%) describing it as extremely complicated. Only 15% consider implementing a marketing automation system uncomplicated.
  • Implementation resources used:
    Whether complexity is a perception or reality, it is the primary reason that a total of 88% of marketing influencers outsource the implementation of marketing automation to some extent. Outsourcing also provides skills and capabilities not always available in-house.
  • Implementation time-frame:
    46% of marketing influencers consider 4 to 6 months to be a reasonable time-frame for completing the implementation of a marketing automation system, while 31% think it should be done in 3 months or less. Nearly one- quarter (23%) believe implementation requires more than 6 months.

You might be interested in Ascend2 process – called ‘research-based demand generation’ – developed to generate leads using factual content of interest to your target customers and nurture those leads to marketing-qualified status

Source: to be found here

Download the publication here https://issuu.com/fredzimny/docs/state-of-marketing-automation-surve

My point of view: there is a lot of confusion about crm, marketing automation and DMP’s still going on. With regard to a possible choice this post compares a..o HubSpot and Marketo

Please share this research credited as published.