DO ME A FAVOUR, STAND UP!
Do me a favour, mentally, stand up. Thank you.
If you know what your business’ CLV is, sit down.
If you’re wondering what CLV is, sit down
If you know what CLV is in theory, but don’t think it matters to you (because who has time to worry about anyone’s lifetime for goodness sake, I have a business to run!), sit down.
By the way, you’re also segmenting yourselves right now, and it’s clear there is no one piece of communication which could resonate with or be relevant to, you all. But that’s for another article.
Now let’s get back to that CLV shall we.
FIRSTLY, WHAT IS CLV AND WHY DOES IT MATTER?
Well, CLV (or Customer Lifetime Value), tells us how people behave with your business in terms of their frequency and spend. But CLV is also a window into future behaviour, because we can map the current behaviour of new guests or customers against existing CLV bands, and predict exactly how those new customers or guests will behave over the year ahead.
This means, because you know your CLV, you can increase your CLV – changing the trajectory of your business’ growth or decline, and giving you more certainty in your revenue.
But that’s not all, because CLV is also the true indicator of your brand’s health. Not open rate, not how many TikTok followers you have, not how many people downloaded your app (because let’s be honest, they only did that to get the welcome offer) – but how long people are willing to spend with you and to what degree. The higher your CLV, the more positive the outlook; the lower, the less time you have to turn things around.
But like you say, who has time to worry about lifetimes, you’re a busy man! But CLV is not based on ‘lifetime’ as you know it, (and this bit is either going to break your heart, or make you stop reading because the truth hurts) – the average CLV for a hospitality customer is only 6-18 months. No one loves your brand as much as you think they do. So that’s an incredibly short window to get maximum value from your customer base.
But just when you thought CLV couldn’t do any more for your business, CLV also helps you SAVE cash on spray and pray acquisition and conversion offers. By identifying the highest CLV customers in your base you can use that info to drive smarter acquisition (of people sharing the same characteristics of those high value customers); and by making sure you direct offers and rewards to the people who will spend the highest and not kill what’s left of your margin.
So get ready to move seats, because you might now be opening up a 4th segment – those who now know what CLV is and are starting to worry that their business is missing some pretty crucial insight considering the climate we’re operating in.
SO, ASSUMING THAT’S YOU, WHAT ARE YOUR NEXT STEPS?
- Stop work on your loyalty app, if you don’t know your CLV or frequency it’s just an expensive vanity project or data capture mechanic at best. You can do way better than that.
- Get stuck into your data to identify and profile your key groups, particularly those worth the most to you in terms of spend and margin. You should be looking for high CLV, fast conversion (the sooner you can get that acquisition cost flowing back into the business the better right?) and low margin kill.
- Overlay those segments with sentiment and engagement data, which can be found in most tech stacks,, to refine your CLV segments by those who also LIKE you most. These people will be the most lucrative targets of all.
- Devise a multi-channel communication plan to drive increased CLV with relevance, and resonance – focusing any investment where you are likely to receive the highest return. (Remember that segmentation we did earlier? Now you know how that relevant content is going to matter if it’s to drive the behaviour we want to see)
- Execute that plan, by using your data to get closer to your customers and delivering the comms most likely to resonate and trigger the action we want our customers to take next. We have a 6 stage ‘Customer Conversation’ framework, developed over 5 years and millions of data points which replicates and accelerates real ‘human’ relationships (and delivers a 32X ROI while we’re about it)
- Test, learn and track the results. Now you’re marketing!
THE FUTURE
The future of marketing is connection, yet for such a people facing sector, it’s clear we’ve forgotten the customer – and it shows.
CLV won’t just tell you how your business is performing. It’ll tell you what kind of business you really are. One built for transactions, and the relentless sales driving rollercoaster that will always lead to – or one built for trust.
The choice, and the value, is yours.
