The Strategic Gap: How Companies Underutilize Customer Lifetime Value

Customer lifetime value (CLV) quantifies the revenue or profit a business can expect from a customer over the course of their relationship. It’s a crucial business metric for decision-making and forecasting.

Traditionally viewed as a retrospective metric, CLV has predominantly been used to assess past customer behaviors and spending. Marketers prioritized acquisition costs, conversion rates, and revenue, but haven’t looked to predict actual customer value over time.

But the landscape is shifting. With an increasing need for cross-departmental integration involving sales, services, data science, and finance, organizations are now adopting a forward-looking approach to leverage CLV more strategically.

Recent research we commissioned from Forrester reveals a noteworthy gap: while 81% of organizations track CLV, only 37% use these insights strategically, and a mere 14% evaluate customers based on key metrics, shares them across lines of business and factor them into forward-looking profit metrics.

The research uncovered a significant disconnect in how organizations leverage CLV and highlights an evolutionary trend in marketing’s approach to customer value metrics.

The Data and Strategy Gaps

Despite the critical importance of CLV, many organizations struggle to effectively utilize this metric in operational strategies. Around half of respondents do not feel enabled to achieve the goal of optimizing business objectives based on key customer metrics.

The gap is in how data is collected and leveraged to inform forward-looking decisions that drive customer engagement and business growth.

While most organizations collect data around CLV, it isn’t being shared and used in strategic decision-making. Many also lack a common definition of “value” and understanding of what makes a customer valuable. This leads to an underutilized potential in shaping customer behaviors and preferences—a future where marketing could pivot from purely predictive to influential.

53% of respondents anticipate that marketing will have more influence on business strategy—and be more effective — as more teams apply forward-looking profit metrics to their customer value strategy.

The study underscores the essential role of technological integration and alignment within the marketing technology ecosystem to drive business outcomes, as affirmed by 83% of survey participants who said martech integration is “highly” or “critically” important to long-term success. But only 19% said their organization is fully aligned across functions.

This points to an important gap. When equipped with the right data to successfully calculate and apply customer value, marketers can run more strategic and effective marketing programs, thus elevating their team’s influence across the organization.

Benefits of Adopting Forward-Looking CLV

Over half of the leaders surveyed anticipate that prioritizing future-looking, predictive value metrics will not only enhance marketing’s role but also improve its overall impact significantly. Specifically, respondents expect a variety of benefits from applying profit metrics to their customer value strategy:

• Improved marketing influence on business strategy
• Improved marketing effectiveness
• Reduced customer acquisition costs
• Improved alignment across marketing and CX teams
• Increased value per customer
• Increased customer retention

The Way Forward

The future of impactful marketing lies in the ability to predict and shape customer behaviors through strategic data use. To establish an effective customer strategy that leverages CLV, organizations must:

1. Define value: Establish a unified definition of customer value that includes future-focused data, ensuring all teams are on the same page. You’ll also need to align around metrics of value, including the complimentary KPIs.
2. Determine data sources: Every team across the organization needs to understand what data is available and how to access it.
3. Remove departmental silos: Departmental alignment is key for making your CLV metrics actionable, including silos that block access to other teams and their data.
4. Integrate technology: Ensure that all components of the marketing and enterprise CX technology ecosystems are aligned to facilitate a unified approach to customer data and CLV analysis.
5. Provide meaningful experiences: Growing CLV depends on the value of your specialized experiences. Marketers need to be able to act on the data in concert with other departments.
6. Apply predictive metrics to the customer value strategy: Consistently utilize CLV across all stages of the customer journey, from customer acquisition through to loyalty and advocacy, to truly influence business strategy and customer engagement.

Technology can help bridge this gap.

Zeta’s AI-powered marketing cloud helps marketers with predictive analytics for customer lifetime value. By harnessing AI-powered models, we can predict CLV with remarkable accuracy and identify opportunities to increase wallet share.

By leveraging actionable AI, we empower marketers to not just see the future potential of customer relationships, but actively shape them. Learn more about the Zeta Marketing Platform.