Tying Engagement to Customer Lifetime Value

Tying Engagement to Customer Lifetime Value

Teresa Caro, Director CRM Solutions, RazorfishDavid Rosen, SVP, Strategy & Channel Development, Loyalty Lab

May 13, 2010

Hello

© 2010 Razorfish. All rights reserved.


Direct marketers recognized long ago that customer segmentation improves profits. One of the earliest segmentation techniques, called

RFM analysis, has been in use for over 50 years. It is based on three simple customer

attributes: Recency of purchase, Frequency of purchase, and Monetary value of purchase,

hence the name RFM.

David Shepard Associates. The New Direct Marketing: How to Implement a Profit-Driven Database Marketing

Strategy, 3rd edition, 1998


Relationship marketing is the retention of customers through varying means and

practices to ensure repeated purchase. It relies upon the communication and acquisition of

consumer requirements in a mutually beneficial exchange usually involving

permission for contact by the customer through an "opt-in" system.

Gale, B.T.,Chapman., R.W. (1994) Managing Customer Value: Creating Quality and Service That Customers Can

See New York: Free Press


Source: http://istobe.com/customer-lifetime-value-calculator.html

Marketer’s Dilemma

How do I create loyal, primary-store purchasers, where they always think of me first and achieve 7-10x the LTV?


Loyalty Programs Addressed This Need

• Carrots to gain additional information and drive changes in behavior

• Better quantification driven by better identification of people and their transactions

• Greater relevance of their marketing communications

Marketer’s Dilemma > How to Measure Advocacy

28% of Internet users cite online reviews and recommendations as the leading factor on purchase decisions


Marketer’s Dilemma > How to Prioritize Channels


Loyalty Membership

Direct Channels

Free Media

Paid Media

Internal Communities

Earned Media

External Communities


Marketer’s Dilemma > How to Revise LTV

+ Direct Influence Value

+ Indirect Influence Value

+ Long Term Effect

Where Do We Start?

Start by Defining Engagement

1. How is engagement measured today?

2. How are consumers engaging with brands?

3. What value should we be placing on those engagements?


Defining engagement is not new.

Yet, current models focus on measurement within a channel – not the channel as a whole.



What Does Engagement Mean to You?

What We Heard

Engagement is more than just the channel. It is the

dialogue that takes place (one-way or two-way), the

ability to choose how / when to engage (e.g., opt-in or

opt-out), the value each channel represents, and

whether or not expectations were met.


What We Heard > Channel Use

Company websitesshopping, purchasing, price comparison,

browsing, researching products and services

One-on-one interactionphone, face-to-face still key for problem

resolution, questions, purchasing

Face-to-faceretail shopping and purchasing

Emailpromos, offers, some communication, automatic

notifications; transfer of non-critical or non-sensitive information

WOMliterally either in person or by phone; a key,

interpersonal touchpoint, it’s engagement once-removed and is a way to learn about any brand

Snail mailtransmitting information, promos – less of a

resource now than email

Social siteslearning about company culture and news,

though many see these as more personal tools

Review siteshonest user-generated feedback, e.g., Yelp,

Amazon

Static adse.g., on buses, trains, billboards; are more

passively consumed

Mobileemerging for financial management, shopping,

purchasing


What We Heard > Key Takeaways

Differentiate through human touch

Afford control

Be relevant

Inject something human at every point – make them feel valued


Consumers want to opt-in and give you permission before they are served

Leverage new technologies to serve up appropriate information

What We Heard > Key Takeaways

Treat consumers fairly

Use the right channel for each need

Get the basics in place

Gain trust through transparency and consistency

Different needs are served by different channels

Optimize each channel first and then integrate and expand



How Do You Measure Engagement?

Experience a Paradigm Shift

Digital can make or break a brand.

Digital experiences create customers.


Of those, 97% said their experience influenced whether they eventually purchased from the brand

65% of consumers say a digital experience, changed their opinion of a brand.

Source: Razorfish FEED Report 2009

Connect the Dots


Single View of

Transactions

Behavioral Data You Control

Engagement Data Across

Social Networks

Relevance-Empowered Email Drives Higher Top- And Bottom-Line Improvement

September 2009 “The ROI Of Email Relevance, 2009”


What’s Next?

Q&A


Tying Engagement to Customer Lifetime Value

Education

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