Tying Engagement to Customer Lifetime Value

Tying Engagement to Customer Lifetime Value

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

May 13, 2010

Hello

Page 2 © 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

Paid Media
Earned Media

Direct
Channels
External
Communities

Internal
Communities
Free Media


Marketer’s Dilemma > How to Revise LTV

+ Direct Influence Value

+ Indirect Influence Value

+ Long Term Effect

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

One-on-one interaction Snail mail
phone, face-to-face still key for problem transmitting information, promos – less of a
resolution, questions, purchasing resource now than email

Social sites
Face-to-face
learning about company culture and news,
retail shopping and purchasing
though many see these as more personal tools

Email
Review sites
promos, offers, some communication, automatic
honest user-generated feedback, e.g., Yelp,
notifications; transfer of non-critical or non-
Amazon
sensitive information

WOM
Company websites
literally either in person or by phone; a key,
shopping, purchasing, price comparison,
interpersonal touchpoint, it’s engagement once-
browsing, researching products and services
removed and is a way to learn about any brand

Static ads Mobile
e.g., on buses, trains, billboards; are more emerging for financial management, shopping,
passively consumed purchasing


What We Heard > Key Takeaways

 Differentiate through
human touch  Inject something human at
every point – make them feel
valued

 Afford control  Consumers want to opt-in and
give you permission before they
are served

 Be relevant
 Leverage new technologies to
serve up appropriate
information


What We Heard > Key Takeaways

 Treat consumers
fairly  Gain trust through
transparency and consistency

 Use the right channel
for each need  Different needs are served by
different channels

 Get the basics in

Optimize each channel first
place and then integrate and
expand


How Do You Measure Engagement?


Experience a Paradigm Shift


65% of consumers say a digital
Digital can make or break a brand. experience, changed their opinion of
a brand.


Of those, 97% said their experience
Digital experiences create customers. influenced whether they eventually
purchased from the brand

Source: Razorfish FEED Report 2009

Connect the Dots

Engagement
Single View Behavioral
Data Across
of Data You
Social
Transactions Control
Networks


September 2009 “The ROI Of Email Relevance, 2009”
Relevance-Empowered Email Drives Higher Top- And
Bottom-Line Improvement

What’s Next?


Q&A


Tying Engagement to Customer Lifetime Value

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