Online ad targeting has become pervasive over the past few years. It started with basic behavioral targeting, and it has moved to other forms of audience targeting, including business demographics, site retargeting, social graph targeting, and even CRM retargeting.
All of these forms of targeting have helped marketers efficiently move spend to increasingly more valuable audiences, but ultimately the goal of all such capabilities is to drive greater awareness and then close the most valuable customers.
But as any business leader knows, all customers are not created equal. Enter the next opportunity in the targeting sphere: lifetime value, or LTV, targeting.
Let's start off with the basics. Cambridge defines lifetime value as the "calculation of how much profit a business could make from one customer over the whole period that they remain a customer."
Seems simple enough, right?
But, according to an article in Entrepreneur, Lifetime value "is one of the most overlooked and least understood metrics in business—even though it's one of the easiest to figure out."
As business professionals, we need to understand how much we should invest in customer acquisition and retention. Naturally, we want to focus our efforts on the customers that will generate the most value over the long term. So how can we target our marketing programs based on this important metric?
LTV targeting starts with a deep understanding of your current customer base so you can develop high-LTV and low-LTV customer segments. Doing so will enable you to create a profile of the "personas" that will have the most longevity and spend the most on your products.
For example, your high-LTV customers might be organizations in which the primary decision maker is a C-suite executive with an income of over $100,000 who works in financial services. By knowing that, you can then create personalized messages to strategically target customers who match that profile, and reach them through a variety of channels.
Historically, such personalized targeting has been done through direct mail. Companies would purchase lists, segment them, and send different offers depending on their match to the target persona. For example, a car manufacturer might send a high-LTV customer a 0% interest offer for the newest car model, whereas a low-LTV customer might get a 3% interest offer.
So how can you achieve the same level of segmentation and targeting in the digital world? Here are four steps to deploying the lifetime value targeting approach online.
1. Segment your existing customer base
To determine who your high-LTV and low-LTV customers are, you must segment your customer database. You can start by taking a look at the size of the company they work for, what industry they are in, their seniority level, etc.
It's also good to have a clear picture of the person or people in the company or household making the decisions and doing the buying. How often are they repeating transactions? Are they purchasing from you once a week, once a month, once a year? Knowing the answers will help to better understand their lifetime value and help you create a profile for that perfect persona.
Here's a simple way to calculate LTV as well, just in case you need it:
(Average Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time in Months, or Years, for a Typical Customer)
2. Develop audience-specific messaging and programs
Once you determine your highest-value segments, creating messaging and programs specifically for those audiences is critical. To achieve the greatest relevancy, think about developing and delivering different messages and offers that correspond with where a prospect sits in the customer lifecycle.
For example, if Mercedes Benz is running an online ad campaign and knows its ideal persona has visited its website (in this case, let's say a business executive that works for a Fortune 1000 company and has a six-figure salary), the company could serve that person an ad with a high-value offer, making him or her more likely to convert. Using CRM retargeting, Mercedes Benz can then track this activity in its CRM system and reach high-value persons who have shown interest.
So the next time this targeted person is online, say shopping for hotels in a nearby destination, Mercedes can serve the executive a display ad with an exclusive offer for a month of free Sirius Radio (complements of Mercedes) for the upcoming road trip.
In the end, the customer is getting personalized offers and is developing a relationship with the brand. When that lease is up, that person will be coming back for the newest model.
3. Target segments through a variety of channels
Your highest-value segments are consuming information across a variety of online channels, so make sure to mix it up and don't focus all of your marketing dollars on a single channel.
If you are tracking your efforts in your CRM system, you'll be able to effectively target those segments in a variety of ways. You can start with onsite personalization, where you can deliver personalized content for your customer on the company website. You can also serve targeted ads to your prospects via social, display, and even direct mail.
Putting the customers at the center of your campaign will, once again, help improve their LTV.
4. Measure, refine, and iterate on your programs
It's important to understand the effectiveness of your program so you can continue to iterate and improve results. You can track a range of metrics to see whether your campaign is working.
Take a look at new visitors to your website. Were they served an ad or not before they got there? Track pageviews and understand what your conversion rate is so you can see whether your campaign is effective. What percentage of your website visitors are high-value customers, and is that proportion increasing? You should also see that the high-value customers that you identified and targeted are maintaining or increasing spend.
You may also notice trends in the type of person converting. For example, if your perfect persona has typically been an executive in financial services, but all of sudden you are seeing pharmaceutical executives convert, you can adjust your messaging and launch new programs geared to that audience.
By methodically tracking your efforts, you'll be able to validate your approach and fuel investments in the right programs as you identify what's working.
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Taking these four steps will help you to create a universe online where you can home in on your highest-value customers over the long-term and then create more of the same—all by being smart about who you are talking to and what you are saying.