Customer Lifetime Value: Are you in or out?

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By: Wise Marketer Staff |

Posted on May 19, 2014

Customer lifetime value is a crucial concept for three-quarters of organisations, and yet less than half say they can measure it effectively, according to research published by Econsultancy and Sitecore.

More than three-quarters (76%) of company respondents either 'somewhat' agreed (25%) or 'strongly' agreed (51%) that customer lifetime value was an important concept for their organisation.

However, only 42% agreed they were able to measure customer lifetime value, including 11% of companies who strongly agreed they could measure it and a further 31% who somewhat agreed.

The 'Customer Lifetime Value: Building Loyalty and Driving Revenue in the Digital Age' report, was based on a survey of marketers and interviews with senior executives from a range of businesses, including British Airways, Aviva and Merlin Entertainment.

According to the research, many organisations aren't set up to manage lifetime value, with 35% of respondents saying that the siloed nature of their organisations and lack of coherent marketing is a key factor hindering their ability to increase CLV.

Around a third of organisations (34%) felt that poor systems or lack of integration hindering customer experience was one of the most significant factors negatively impacting their ability to build CLV.

The research also found that a 'single customer view', 'customer experience management tools', 'dedicated retention staff' and 'more interaction between online and offline channels' are the most effective tools for enhancing customer lifetime value.

The overwhelming majority of respondents (89%) agreed that a great customer experience is key to driving brand loyalty.

"Enhanced customer lifetime value is dependent on the integration of activities that straddle the digital and physical worlds. This requires the kind of joined-up approach within organisations that is often difficult to achieve," said Econsultancy research director Linus Gregoriadis.

"Brands recognise the importance of delivering a great customer experience, but what needs to change is for brands to re-define the meaning of customer experience, to embrace every interaction with their brand," concluded Shawn Cabral, marketing director for Sitecore UK. "To provide this holistic experience, it is not just about technology, but also being able to be 'multichannel' within an organisation."

Other key findings
Survey respondents across a range of sectors were also asked about perceived customer loyalty, ease of switching and propensity to switch:

  • Business respondents in the education, manufacturing and charities / non-profit sectors are most likely to see their customers as loyal. Utilities and healthcare/pharmaceutical respondents see their customers as least loyal.
  • Companies in the travel & leisure, consumer goods and utilities sectors are most likely to say their customers find it 'very easy to switch'.
  • Although around two in five (44%) automotive brands believe their customers find it 'quite' or 'very' easy to switch, only 11% felt customers had the potential to be disloyal, with most remaining neutral or saying customers are 'quite loyal' (44% each).
  • The charity sector sees almost no activity in the area of disloyalty or propensity to switch, although 16% of respondents stated that it was relatively easy to switch. A quarter of respondents working in this sector indicated switching is very difficult and a similar proportion felt consumers were very unlikely to switch.
  • Over a third (36%) of those working in the consumer goods sector stated that switching was very easy, while only 7% believed it to be very difficult. Two in five believe their customers are 'quite' loyal, but this plummets to 6% at the 'very' loyal point.
  • Education brands believe that it is relatively easy for consumers to switch (33%) despite the impression that few are likely to do so (13%).
  • Healthcare brands have a uniform spread of 'very loyal' to 'very disloyal' customers (10% each).
  • In manufacturing, only 6% of respondents felt that loyalty was very low, the majority claiming to enjoy a reasonable degree of loyalty along with a general reluctance to switch providers. Two in five (44%) felt that it was difficult for customers to change manufacturers.
  • Professional services shows a distinct leaning toward customer loyalty and not much propensity to switch. That said, respondents admitted that it wasn't particularly easy for customers to switch brands either, although only 4% suggested it was very difficult.
  • Retail largely occupies a rather 'middle of the road' position with customers neither especially loyal or disloyal, despite the relative ease with which they can move to a competitor.
  • A large proportion of technology, media & telecoms respondents believe their consumers are ambivalent toward brands, with 44% finding consumers neither loyal nor disloyal. Around a quarter (26%) said their customers would find it difficult or very difficult to switch, indicating that loyalty may not be due to a lack of consumer will.
  • While presumed to be largely disloyal, travel customers are not considered prone to switching even though the industry believes it is neither easy nor difficult to do so.
  • Three-quarters of those working in the utilities sector believe their customers are 'quite disloyal', but three in five say they are neither likely on unlikely to switch. This may partially be because two in five indicate it's 'quite' or 'very' difficult to switch.

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