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  • July 19, 2016

Capture Better Customers with LTV Modeling

A brand’s core health is contingent on its customers. Catering to them. Engaging them. And most importantly, nurturing and retaining them. Being able to identify where your highest value customers are coming from is paramount to gold. It is what drives the majority of digital marketing.

But not all customers hold the same weight. Some are fickle sale-seekers, perpetually on the hunt for the next great deal, while others have the potential to become great brand loyalists. And it’s the loyalists that marketing executives need to pay heed to. A fair question to ask, then, is, “How can I predict the value of each customer far beyond their first purchase?” or “How can nurturing high-value customers yield a more robust ROI?”

The key lies in forward-thinking, predictive analytics. That’s what lifetime value (LTV) modeling —powered by DataScience — uniquely brings to the table. LTV takes a deep dive into the long-term value of each individual customer via pre-existing datasets, and from that deduces who will more likely deliver a steady stream of income for your business well into the future. Pretty valuable information when trying to optimize an effective marketing strategy.

But pinpointing how engaged a customer will be down the line and how much they are likely to spend is a feat in and of itself, and these variables will continually shift over time. LTV is designed to tackle those very concerns. So let’s better understand how.

What attributes make up the best customer?

It all boils down to comprehensive data that is unique to your business. The more detailed the data, the more accurate the results. LTV modeling utilizes customer segmentation techniques to analyze a business’ data and extrapolate who of your customer base holds the most purchase power potential. The technology is able to sift through demographic information, such as zip code, age, gender, race, and location as well as behavioral data relating to your customers’ online activity to segment your customers in a way that’s relevant to your marketing. The predictive insight provides a roadmap detailing where to shift focus on your marketing strategy to effectively resonate with customers who emerge as the strongest performers historically.

Which acquisition channels have the best ROI?

For marketing executives, this may be the most important question that LTV answers. The bottom line demands that your marketing spend can be justified and how that allocation yields a rise in sales, ergo increased revenue. So where is your marketing most impactful with your bread and butter customers?

Your digital marketing strategy may have placed primary focus on Google ads. But LTV reveals that to best reach your highest-value customer more should be invested on Facebook. This information is vital to accurately deciphering the most successful touchpoints leading to purchase and maximizing an existing spend in ways that yield dramatically different, and more lucrative end results. A small change in where and how your brand markets can be the difference between leaps of success and stagnation or worse, failure.

What kinds of marketing experiences keep customers coming back?

We all have been on the receiving end of fruitless email campaigns that result in every marketer’s nightmare: Clicking on the “unsubscribe” button. Being able to understand the traits that precede cancellations is imperative. On the flip side, impactful marketing, such a loyalist program, can inherently cement your brand as one that speaks to its customers. Towing that line can be a daunting challenge. Knowing what works and what falls flat with your customer is imperative. Understanding the types of digital activities your customer’s already gravitate toward and consistently engage is the tipping point of effective marketing. Brands can create a sharper image of their marketing performance, vis-à-vis LTV’s predictive recommendations, that uncover the best means of resource redistribute across a plethora of marketing channels.

LTV modeling can eliminate much of the guesswork from your marketing strategy, and in turn yield a more robust ROI. Keen to learn more? Click the button below to download our white paper, "An Executive's Guide to Predictive Data Modeling."

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Photo by Lisa @ Sierra Tierra / CC By 2.0

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