Customer Lifetime Value: An Imperative in the Digital Era


For years, smart businesses have operated under the mantra “the customer is always right.” In an article earlier this year, I wrote about research that showed companies are increasingly taking customer experience management seriously, with many reporting higher profits because of it.

Today, let’s examine the link between customer experience management and financial performance. What tangible factors do companies measure to understand the lifetime value of their customers, and how does focusing strategically on customer lifetime value positively affect the bottom line?

Avaya recently commissioned a research study that found 47 percent of companies say measuring customer lifetime value (CLV) was an essential part of their business strategy. More importantly, those strategic users of CLV significantly outperform non-strategic users. The companies that focus on customer lifetime value significantly outperform those that don’t, in key metrics like customer satisfaction, retention and advocacy.

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Consumers have more power today than ever before. They have more channels to choose from at all points along the customer journey. They have their pick of places they can go to for help in making purchasing decisions. They have a louder voice through social media. They make a lot of buying decisions outside of the selling organization’s reach.

With the power to get information at the click of a button, customers are far more demanding of companies. They expect answers, and service, quickly. In many cases, the rate at which consumer expectations are growing is outstripping the service levels companies can deliver with legacy customer service technology.

This is the inflection point where strategic customer lifetime value intersects with the capabilities and importance of contact centers. Companies that focus on strategic lifetime value and use their contact centers as a focal point for customer experience will enjoy a strong competitive advantage over those that don’t.

The equation is simple: If your customer’s experience is good, they’re more satisfied, more likely to become brand advocates and–importantly–more likely to return and spend more money with your company. That requires you to understand who your customers are, what they need, what they already have and what they have looked at in the past week, month, or longer. That information will give you a better chance of tailoring your offer to them, personalized to their specific needs.

By focusing on the elements that make up customer lifetime value, you’ll do a better job of managing revenue, cost and resources–all resulting in higher profitability. Importantly, you’ll retain customers longer–the topic of my next article–and find the value you receive from those customers increases rapidly as you interact with them over time.

Does your company consider customer lifetime value a strategic imperative? Should they? I’d love to hear from you.

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