One of the most valuable applications of customer lifetime value (LTV) modeling is using it to target the highest-valued customers or players. I have written many times about the importance of LTV and how to calculate it. One of the most powerful applications of LTV is online customer targeting.
As an article on MarketingProfs points out, 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 allow you to create a profile of the “personas” that will have the best retention, highest word of mouth and spend the most on your products.
High-LTV personas could be “women over 35 who spend most of their day at home.” By knowing the persona, you can create personalized messages to strategically target customers who match that profile, and reach them through a variety of channels.
Once you have built personas for your players or customers, there are four ways to leverage this understanding:
- Create personas for high- and low-LTV customers. You should start by segmenting your users or customers based on different personae, then calculate the LTV for each persona. This will give you segments that are high LTV and segments with LTV. Keep in mind that you will have very different personas within each group. You can have one persona with a high LTV where the LTV is high because they spend a lot in a few transactions. Another persona with a high LTV might have very long retention and many small purchases. A third persona with a high LTV might not spend anything but generate hundreds or new users.
- Develop content specific for each segment After you identify your top performing personas/segments, you should create messaging and programs specific to those audiences. To achieve the greatest relevancy, think about developing and delivering different messages and offers that correspond with where a prospect sits in the customer life cycle. By delivering the customer with personalized offers, you also build a bond between them and your product. They are thus more likely to return the next time they are looking for a similar experience or product.
- Target your segments through multiple channels. Once you understand your top persona, you can identify the different channels they likely visit online. With online marketing, you will often run out of prospects in a given channel, a great user source will dry up sooner rather than later. If you understand your segments, you can find destinations where your customers are likely to see your marketing. This requires you go beyond basic performance marketing but is a great opportunity to capture high value users.
- Iterate, iterate, iterate. Not sure how many times I have put this in as a crucial last step in almost any process, but I will do it one more time. It is crucial to measure each advertising campaign and channel and optimize against that. You may find that the initial personas you created are not accurate or could be improved. By optimizing the persona/segments, you will either get customers who have a higher LTV or get more customers with a high LTV. You will also find that some channels that deliver high LTV users are more effective than others and by optimizing your marketing mix can get the highest return. Iteration is the most crucial element to targeting high valued users.
Use Lifetime Value to target your best prospects
The steps above will help you optimize your marketing mix. Rather than just adding users or customers, you are adding the customers who will be the foundation of your business and generate the most profitability.
- Create different personas for your high- and low-LTV customers, focusing on the segments that generate high LTV.
- Create marketing programs and messaging that best appeals to these high-LTV personae.
- Use multiple marketing channels where your high LTV customers are.