Customer Lifetime Value (CLV) is strongly linked with brand loyalty and ease of brand switching, so the ability to measure it varies by sector, product type and purchase occasion. In this article we examine whether the type of sector a business operates in has any influence on CLV and what strategies can be used to increase future value.

The ability to enhance CLV can be dependent on many factors, from customer personality types to the ability for a brand to differentiate the experience it offers. In some cases, the sector a business operates in can be the most influential factor when it comes to enhancing the customer experience.

Traditional methods to increase CLV have focused around either upsell, cross sell or ensuring customers don’t leave through retention efforts. Your customers are you brand advocates, and for some brands, driving advocacy rather than simply a repeat or additional purchase is the order of the day, and the responsibility falls with marketers to determine which strategy will drive the most loyalty with their client base.

A recent study by Sitecore explores customer loyalty across 12 different business sectors, including manufacturing, retail, financial services, travel and leisure and healthcare.

The participating companies were asked to rate their customers from one to five based on how loyal they believed they are, how likely they would be to switch brands on this scale and how easy or difficult customers would find it to switch to a competitor.

The retail sector is one in which many people expect customer loyalty to be low and the propensity to switch is high. The reason being, is that it is classed as a highly price-sensitive, disloyal and commoditised sector.

Interestingly, the findings of the study reveal respondents from the retail industry believe their consumers were on balance neither likely nor unlikely to switch. This suggests that, on one hand, most retail companies think their customers aren’t highly motivated to switch, but equally that most brands are struggling to build a brand story which resonates and truly engages with their customers.

The automotive sector faces even bigger challenges when it comes to growing CLV, as customer demand is typically driven by a range of factors; technological advancements, public opinion, cost, life stage and fashion; factors which are extremely difficult for companies to control or influence.

The media and technology and telecoms industries also face a similar challenge. Whilst cutting edge, global brands like Apple receive passionate loyalty from consumers, most companies in these two sectors are impacted by a wide variety of factors, including quality of aftersales, perceived quality of product, influence of friends and family and competitive pressure.

At the opposite end of the scale, the highest loyalty (and lowest switching rates) are within the professional services sector, which it seems, is due to the personal, one-to-one nature of client/company interaction.

Interestingly, with the utilities industry, marketers rank their customers as the least loyal out of all the sectors, but the research suggests that customers are amongst the least likely to switch to a competitor, with 60% of respondents saying customers are neither likely nor unlikely to switch. Industry research also states that around two-thirds of gas and electricity customers have never changed supplier, which is not unsurprising given the perception of an extremely lengthy and tiresome procedure.

The good news for companies is that the overall findings indicate that 64% of brands believe improving customer experience is the route to focus on CLV and move customers towards the ideal bracket of being unlikely to switch and remaining loyal.

Thanks to the advent of digital, it is now possible for companies to deploy brand strategies such as improving customer experience, being smarter with data, having better customer insight and increasing personalisation to enhance CLV.

Personalisation

Personalisation means more than sending a mass email with the recipient’s name at the top. Using the insight you have on your customers, you can deliver an experience to your customers in context and relevant to their individual needs. Just starting out small can have a big difference to your customers, such as delivering content that is relevant to their location – recommending a language option or showing local store outlets. Common sense drives personalisation; imagine if you met the customer and they explained their needs to you, what you would do to meet those needs.

Improving Customer Experience

CLV will increasingly be linked in with customer experience, but as we know, a bad experience will be shared quicker and wider than a good experience, so the brand needs to address at least the obvious holes in the experience. Ensuring both on and offline experiences are seamless and up to par is a vital component in supporting a business’s communication strategy. Whether it is handover between on-line and in-store, a personalised email or a live chat agent, brands must ensure every time a customer interacts with the business that the same standard of customer service is maintained.

Data

Using data collected from a customer’s lifecycle through a number of channels, not just online, means brands can build a relevant, contextual profile of them. But with this knowledge, what would you do differently, how could your marketing change? On your website for example, how would the experience change for a customer who is a frequent visitor to your site and who buys high value items, compared to a first time visitor. Although you have the customer data, it is how you analyse it to get relevant insight and then apply it to the customer experience that will matter.

Better Customer Insight

Giving customers the opportunity to leave feedback at regular stages of their lifecycle with a business or tailor the experience gives your customers more control of the experience to help drive improvement. It also informs a business of what is working and what isn’t, to pre-empt a problem before there is one and to prevent customers being lured to competitors.

In conclusion, where consumers can see that the data and insight they are sharing with a brand is being used to enhance their experience to their advantage, it’s a ‘win-win’ for both the brand and the consumer.

Ultimately, no matter what the sector, a collaboration of all CLV strategies regardless of channel or marketing tactic is needed to enhance a customer’s experience and to help drive long-term revenue.

 

By Shawn Cabral, VP Corporate Marketing at Sitecore. 

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