The Customer Lifetime Value (CLTV) is one of the most important metrics in the marketing and loyalty strategy of any company. Through the CLTV calculation, companies can understand how much each customer is worth throughout their life cycle and therefore optimize their customer retention and acquisition strategies.
In this post, we will share a success story in which CLTV was extracted to improve the marketing strategy of a company, which resulted in a significant increase in profitability and customer loyalty.
Discover how the use of customer lifetime value can be the key to the sustainable success of your business.
What is the Customer Lifetime Value (CLTV)?
The Customer Lifetime Value (CLTV) is a metric used in marketing to measure the total economic value that a customer brings to a company during the entire time they are a customer of the same.
The CLTV is calculated taking into account the monetary value that a customer contributes to the company throughout his life as a customer. It takes into account the amount he spends on each purchase, the frequency with which he makes purchases, and the time spent remains as a customer of the company.
This metric is very useful for companies, since it allows them to know the real economic value that each customer contributes. And, therefore, focus their efforts on retaining the most valuable customers and loyalty, instead of spending only on acquiring new ones.
The client
A renowned retail company that sells all kinds of products, from textiles to home and appliances, among others. With a presence in different Latin American countries.
The business challenge
Within a sample of 10% of the consumer portfolio selected by our client, four types of consumers were identified:
1. Those who were inactive for more than 6 months
2. Those who presented a very sporadic transactional behavior and low ticket, with purchases between 3 and 6 months.
3. A third group with a high transactional behavior from the point of view of the value of the ticket and with purchases in the last three months.
4. The highest value group, where there were customers with at least one purchase per month in the last 6 months, with medium and high ticket values.
The challenge posed by the client was to carry out campaigns through three channels (mobile phone, email and physical mail) that would increase the RFM (Recency, Frequency, Value) in each of the identified groups.
Solution GBA Smart Marketing®
Initially, we collected all transactional information from the four customer groups for the last 24 months. Understanding their consumer categories, points of sale where they made purchases, payment method, and, of course, the details of the products purchased.
We carried out analyses that allowed us to understand the correlation of the points of sale with the places where the consumers lived. We analyzed the correlation that existed between the campaigns to which these consumers were exposed during this period of time and their actual purchases for each of the categories and PLU’s/SKU’s.
In the same way, we study the response to the different messages and define the “Best Time to Contact” for each one in order to differentiate the results from the dimension of the contact rate. Likewise, the response of the campaigns and the purchases were actually achieved.
With the Attribute Set by GBA Smart Marketing®, and information from our client, we built a CLTV model that contributed to the prioritization of each of the consumers according to their segment. The budget that was worth investing in each of them, identify those consumers with high potential, and optimize the budget by calculating the ROI of each of the campaigns we manage. All of them were analyzed from four dimensions: Point of Sale, Product Category, RFM, and Consumer Segment.
The comprehensive solution also incorporated the Social & Mobile Data of the target we are targeting. It was possible to segment and sub-segment all the consumers by their tastes in more than 300 categories, profiles, and geolocation.
The result
- We built a solution that allowed us to have, in one place, the complete and necessary information to plan a successful campaign.
- We make it possible to measure the ROI of each campaign just hours after it is executed.
- We optimize the communications budget by generating fewer contacts with greater effectiveness.
- We increased recency globally in the four groups by 8.76%.
- The frequency increased, on average, for the four groups, with 0.65 monthly transactions per consumer.
- The average ticket of the four groups increased by 11.54%.
- The ROI of the solution, at the end of the project, was 21.98% higher than the customer’s historical ROI.
For GBA Smart Marketing®, the value and interpretation of the data have a fundamental role in the development and innovation of our portfolio of customized solutions for each of our clients. Contact us for more information about our services.
