Looking beyond the holiday purchase: understanding customer lifetime value

The ideal brand relationship is much more than a single experience. It comprises multiple experiences and events that tie the consumer to that specific brand. That brand becomes the go-to for purchasing the perfect birthday gift or the top destination for booking a much-needed getaway.

Analyzing each of these brand interactions beyond the user’s first purchase allows advertisers to properly understand the complete customer journey.

With the holiday season upon us, it’s time marketers moved beyond the basics of attribution and focused on long-term optimization, based on customer lifetime value (CLV). The powerful business intelligence that can be derived from analyzing the user journeys of your customers over an extended period, beyond what they bought on Black Friday or Cyber Monday, is essential to knowing how to maximize future marketing investments to meet your evolving business goals.

Customer lifetime value

In some marketing circles, customer lifetime value is defined as the process of predicting the worth of a consumer throughout their entire relationship with your brand.

As a marketer who is tasked with doing more with less, wouldn’t you want to know which of your customers has the potential to provide your brand with the highest ROI in a month, six months, or even a year?

Brands investing large portions of their marketing budgets into Q4 advertising would do well to look at the full CLV of acquired consumers during this season. The ability to show that a new customer returned after the holidays to purchase from your brand is a valuable metric that gives an extended view of ROI.

Use data to target customers with the highest lifetime value

Determining which of your customers will eventually provide your brand with the highest lifetime value can help you set more realistic targets for acquiring new customers. You also can use these insights to better optimize your retention campaigns.

More importantly, you will gain a better understanding of the marketing channels that are most successful in reaching and engaging these customers in a way that’s mostly likely to bring them back for a second and third purchase.

It’s important to find an attribution solution that can provide marketers with actionable business intelligence designed to help them identify which customers they should focus on across marketing channels.

When choosing an attribution tool, make sure you build data sets right from the start to include the segmentation of new versus existing customers. This will allow you to go on and do analysis further down the line.

Insights like these are significant in helping marketers plan for the future and assess which marketing campaigns should be continued and which ones should be halted for lack of effectiveness.

Case in point: In October 2015, Rakuten Marketing (my employer) worked with a top US retailer on a new customer acquisition campaign. Using our omnichannel attribution platform, we were able to help them identify new customers who made purchases both online and offline and to pinpoint the combination of channels that were instrumental in driving these new qualified customers to the brand’s website.

From there, the retailer was able to optimize their marketing budgets to reach the target audience at optimal touch points along their journey.

While these metrics played a significant role in helping this brand achieve their short-term goals, the real value was produced a few months later, when Rakuten Marketing revisited the initial customer acquisition campaign.

When looking at the customers who purchased during the initial campaign, we were then able to further attribute a nearly 25-percent increase in this initial revenue generated, as the new users returned and made purchases from the brand in the following months. These purchases happened across different channels and devices.

Having a holistic view of tracking users over time allowed the advertiser to reassess the initial ROI given to the campaign and plan their budgets for the future based on this new ROI.

Key takeaways for understanding the lifetime value of your customers

The modern shopper has come to expect a seamless and integrated shopping experience, and the brands that can truly understand the user journey will succeed in building loyal customers who keep coming back.

For brands that are committed to a significant marketing budget during the holidays, it pays to invest in an attribution solution that can identify not only your immediate gains, but also the long-term ROI of new customers you acquire during this busy shopping season and beyond.