The Hard Truth About Customer Lifetime Value

The CMO Council found that 80% of marketers have a limited understanding of customer lifetime value, despite how important it is. “LTV” is a term people love to throw around, but the numbers don’t lie: does anyone really know what they’re talking about?


150 CMOs shared their insights for CMO Council’s latest research, and the findings highlighted LTV blindspots and how marketers can redefine and track LTV in the increasingly digital landscape. The results were alarming: only 17 percent of Chief Marketing Officers track their LTV well. Surprising, since LTV enables organizations to craft meaningful relationships with their customers and respond to their ever-changing needs. Not to mention, LTV is a huge revenue driver. 


As Genefa Murphy, CMO of Five9, shares in her “Get to Know a CMO” interview, “Marketing isn’t about collecting random leads. Customers want more—they want to be engaged, to have a personalized experience and to feel like companies respect their time and effort.” Data is a huge factor in that relationship-building and will only continue to increase in importance as time goes on, Murphy predicts. 


Data is power, making LTV and data best friends. The more information brands have on their audience and their customer, the more they can create messages that customers will resonate with and respond to. From there, brands can develop relationships that are meaningful and create loyalty between the brand and the customer. But this is not new information; we knew that.


The kicker is you need to be using the right data to learn about your customers. EthniFacts founder, Mike Lakusta argues in this month’s Spotlight article that the information brands receive about the diversity of the American population may not be all that accurate, after all. Numbers don’t lie, but the way the numbers are read can be misleading. Make sure when tracking LTV that the right variables are accounted for—and track it consistently, because according to the findings of survey, 1 in 4 CMOs aren’t tracking LTV at all. 


[Related: Download the report, Humanizing and Analyzing Relationships to Drive Revenue, Retention and Returns here]


The CMO Council report also discusses how there needs to be ownership of LTV. Cross-functional alignment has been a huge topic for CMO Council lately, and rightfully so. Alignment for all stakeholders helps create a cohesive marketing strategy and a symbiotic relationship between marketing and the rest of the organization. However, the research shows that there is little-to-no ownership of LTV. Whether that can be attributed to a miscommunication and assuming someone else is “taking care of it” or to other teams not understanding the importance of LTV depends on the organization, but that doesn’t change the hard reality that most teams don’t communicate well cross-functionally. And that needs to change. 


At the end of the day, what are we all doing this for? What’s the point of tracking LTV and developing all these initiatives to increase it? It all boils down to loyalty. One loyal customer can prove to be more valuable than 10 new leads, so it’s time we shift the conversation from constant lead acquisition to retaining and nurturing the existing customers. Provide value to them, even when their lead isn’t new and shiny anymore. These customers show up for you, so it’s important to show up for them, too.


Robert Passikoff discusses loyalty in our Featured article this month, specifically how 2020 was the ultimate “stress test” for brands. 2020 jolted many marketers awake when they realized that when times get tough, customer loyalty is more important than ever. When budgets shrink and stress rises, customers shift to the easier, cheaper and more convenient options, regardless of what brands they may typically buy. How do you compete with that? And how can you show your customers that you care? There’s a reason the most effective LTV-boosting initiative is when brands enhance communication of the product’s value proposition.


There’s a long way to go for marketers embarking on their LTV journey, but the work is well worth it. 


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