Despite growing awareness that customer lifetime value (CLV) is a better method for measuring success than return on investment (ROI), the triple whammy of a lack of digital skills, customer data, and organisational silos are holding back its use as an actionable business metric.
So says a new report from Criteo – “Is ROI dead? The state of Customer Lifetime Value 2019″ – which reveals a significant increase in marketers who have a high awareness of CLV (43% in 2019 vs. 34% in its 2018 survey) and in organisational efforts to monitor CLV (32% vs 24%).
However, the study also highlights three major data, business, and skills gaps that hold organisations back from making CLV an actionable metric. Firstly, a lack of understanding within the business typically manifesting as an inability to bring all stakeholders on board with the measure; second, challenges around finding and using the data necessary for a complete picture of CLV, and third, a struggle to retain the appropriate in-house talent to implement the metric.
Criteo UK director of account strategy and sales Elizabeth Brennan said: “The adoption of CLV reflects an important shift in the way businesses look at customer relationships, from short-term profits to long-term sustainable relationship. The truth is, for many marketers, ROI is no longer fit for purpose. The study shows that the industry is looking for a more sophisticated metric that gives businesses a deeper understanding of their customer relationships and their value over time.”
In addition, the findings show an encouraging level of agreement on the benefits organisations gain by using CLV, including increased customer retention (64%), gaining more sales (59%), greater brand loyalty (58%) and improving personalisation (47%).
CLV has emerged a key strategy for driving loyalty, an area that remains a battleground for UK brands according to Criteo’s “Why We Buy” survey conducted at the same time. The survey revealed 64% of shoppers are willing to consider new brands, with “value for money (63%), product selection (43%), customer service (44%) and low prices (43%) the most prevalent reasons for consideration.
UK marketers are generally sophisticated in their use of data, but Criteo’s research highlighted some significant challenges in getting full value from customer interactions and behavioural habits. Key barriers include tracking customers cross-device (30%), the inability to collect data due to users not being signed in (23%), and an inability to track single-use products (21%).
Two-thirds (66%) of respondents said their organisation could monitor CLV better, with specific business challenges identified including unsophisticated strategy (20%), lack of senior buy-in (20%) and organisational siloes (17%). The results highlight the need to get buy-in from senior business leaders and department heads if CLV is to become a company-wide endeavour.
The research also showed that the skills gap is continuing to widen; 40% of respondents said their organisation lacks in-house skills to monitor CLV (up from 26% in 2018), 27% find it too complicated to monitor and 18% are unable to implement their learnings. Scarcity of talent appears to be an issue across all enterprises but was particularly pronounced among larger businesses of 500 or more employees.
“Marketers, senior management and lines of business heads all have important roles to play in bridging these gaps and making CLV an actionable way to monitor and enhance relationships with existing customers and prospects. With deeper understanding and an increased ability to implement, we believe that CLV could replace ROI as the primary measure for the success of customer relationships and a key driver for loyalty in a competitive marketplace,” added Brennan.
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