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Why Customer Lifetime Value Matters: A Discussion with AdRoll President, Scott Gifis (Part II)

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In case you missed it, Scott Gifis, President of AdRoll, recently participated in a Q&A panel at eTail West to discuss how to enhance the customer and brand relationship and industry trends and predictions. You can check out part one of this discussion on customer lifetime value here. Below, he offers insight into the state customer acquisition, advice for optimizing customer retention programs, and predictions for the industry as a whole.

What are your quick-win tips to create and implement an effective retention program? How are you thinking about your retention goals?

Scott: Step 1 - Distinguish a repeat customer from a new prospective customer. This starts with investments in identity data and creating value for returning shoppers that encourages them to share information. When thinking about customer acquisition, be mindful of the channels and methods used. Do you know why you won a customer in the first place? Are you winning customers in a marketplace environment based on price? Are you seen as a commodity or have you established differentiation in a way that connects with that customer?

To be able to answer these questions, you’ll need to own your customer data from the onset. You can’t be over-reliant on the likes of Amazon, Facebook, and Google to tell you who your customers are. They’re important channels for marketing and distribution, but you should eliminate the middleman between you and your customers.

Step 2 - Give your marketing a personal touch. CMO.com found that 51% of consumers are more likely to make a purchase if the content is personalized. Too many brands still segment audiences based on simple attributes, like intent, and over-index on performance advertisement (and yes, I understand this is ironic coming from a performance advertising company, but bear with me). Honing in on performance has caused us to discount the value of tailored messaging—especially at a time when personalization at scale is more possible than ever. It starts with how well you understand your customers: go beyond the products they purchase and differentiate your story based on common interests and goals.

Step 3 - Optimize your customer lifetime value (CLV). By doing this, you may realize that you’re spending huge sums on acquiring customers because you haven’t made enough of an investment in your loyalty programs. For example, if your customer acquisition cost (CAC) for a net-new customer is 30% of your first sale, then it makes sense to provide discounts and promotions to your past customers at 10-20%. You’ll need to think differently about how you measure and attribute various programs. Vanity advertising metrics and surface-level attribution models, such as last-click, need to be replaced with more comprehensive forms of measurement. It’s vital to make an investment in truly understanding your CLV and separate out the cost per acquisition (CPA) for new and repeat customers. You’ll probably find that you’re burning a lot of dollars that you could be sharing with your customers via loyalty programs, and driving faster, more sustainable growth.

How do you see this space evolving?

Scott: We are living in a leveraged economy. The Herfindahl-Hirschman Index (HHI) toppled $13.1T, unemployment is at historical lows, and yet debt-to-income ratios eclipsed 22% in 2018 while personal savings rates have steadily declined below 5%. It’s exciting that VC funding has emboldened brands to invest in growth; however, this perhaps is not sustainable when we don't measure growth in the way Board of Directors (BOD) or CFOs would (i.e., revenue and profits). My advice: get smart and begin focusing on CLV and repeat business or loyalty programs—really invest in it with proper solutions for data management, insights, personalization tools, and measurement. Your goal should be to develop a holistic, 360° view of your marketing strategy, beyond a single campaign or channel, and how it is (or isn’t) working. These insights will empower you to maximize your investments and growth potential while providing a solid strategy to dictate your decisions as a marketer. Given the seemingly endless changes in our macro environment, coupled with the rapid rate of new technology adoption, marketers now more than ever need to quite literally dare to grow—and a focus on retention enables them to do just that.

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