Why CMOs Are Struggling To Maximize Customer Lifetime Value

Developing customer lifetime value (LTV) enables brand leaders to create more effective marketing mixes and respond to shifting budgets, yet only 17 percent of chief marketing officers track their LTV well, according to the CMO Council’s latest report, ‘Humanizing + Analyzing Relationships to Drive Revenue, Retention and Returns,” conducted in partnership with Deloitte.

Based on responses from 150 CMOs, the findings highlight LTV blindspots and how marketers can redefine and track LTV to reflect the new digital realities.

For 44 percent of CMOs, the top reason they analyze LTV is strategic organizational focus on customer retention and value creation. LTV, also a key performance indicator of a brand’s ability to deliver great customer experiences, helps marketers justify spending on targeted campaigns.

More importantly, LTV is a reflection of a brand’s ability to create loyal customers, which drives profit. Data from a 2020 Deloitte report shows that 87 percent of consumers are loyal to their favorite brand for three or more years, with 61 percent making at least three purchases from the brand in the previous six months.

The advantage of LTV investment for a brand, however, goes beyond the marketing team. The CMO Council found that 53 percent of chief executive officers and 49 percent of heads of sales utilize LTV to inform strategic decisions.

Nevertheless, CMOs struggle with tracking LTV– 82 percent track LTV only moderately well or worse, and more than one out of four don’t track LTV well at all.

The revenue of a customer over the course of a lifetime should be three times the cost to acquire that customer. While this cost of acquisition (CAC) to LTV ratio is a good starting point for understanding LTV, 43 percent of leaders rated their ratio as average at best. Another 25 percent rated it as below average or very poor.

Sixty-six percent of marketers cited revenue per user as a core component for measuring LTV, followed by 45 percent for transaction per user and 26 percent for sessions per users. 

For LTV to be effective, however, leaders must take into account a variety of factors, starting with customer segmentation to ensure they’re not wasting resources chasing the wrong customers. The reality is 84 percent of respondents agree they’re not effectively segmenting and targeting customer sets with the most potential for long-term value.

Rather than rely on traditional demographics, marketers are better off developing psychographics of their customers and track online and offline buying behavior. This approach may not benefit, say, a food and beverage company like PepsiCo, which targets customer “cohorts,” or people with a shared concern such as their health, but even in these cases segmenting is key.

“Our aspiration is to track the lifetime value at the consumer cohort level. We think a lot about penetration and the frequency of purchase of our products over a given time period—the dynamics of lifetime values,” says Ram Krishnan, global chief commercial officer at PepsiCo.

Another reason LTV suffers is a lack of clear ownership. When asked who owns this area of strategic growth, answers varied greatly: CMO (32 percent), chief revenue officer (16 percent), head of sales (14 percent), chief executive officer (nine percent) and line-of-business leader (eight percent). As the report notes, the correct answer needs to be making all of these leaders accountable for LTV.

“Building relationships is a marathon, and it takes forward-thinking leadership to look at LTV. Many companies are focused on the here and now, and this year they’re in triage mode. You have to remember that the average CEO tenure is five years. That’s why a lot of companies fall short with LTV,” says Brett Townsend, head of North America insights for Electrolux.

The top challenge for cultivating lasting relationships boil down to data, without which marketers can’t segment and target customers with the highest potential for net profit. Respondents’ primary areas of concern include aggregating data for a robust view of the customer (55 percent), shifting from assumptions to predictive knowledge of consumers’ needs (47 percent) and identifying the moments to provide delight and differentiation (44 percent).

The data-driven insights that CMOs seek most are: level of satisfaction (44 percent), LTV (41 percent), incident of churn and defection (37 percent), customer purchase history (35 percent) and brand loyalty (33 percent).

The good news is marketers know what steps they must take to convert customers—humanize connections, align the organization to fully deliver on the brand promise and offer products that meet well-defined needs.

LTV-boosting initiatives that CMOs currently find most effective include enhancing communication of product value proposition (47 percent), doing more sophisticated targeting (42 percent) and leveraging relevant marketing content (42 percent).

To maximize LTV, marketers must change their mindset from acquisition to retention, as well as pay close attention to channels where customers leave signals about their needs, such as email (73 percent), social media channels (54 percent) and web forms (54 percent). Consumers may provide the greatest amount of signals over email, but the most effective signals occur through service and support interactions.

Visa Elevates Danielle Jin To Head Of Marketing, Asia Pacific

This week in leadership updates, Visa promotes Danielle Jin to head of marketing for APAC, McDonald’s Canada names Alyssa Buetikofer CMO, Confluent hires Stephanie Buscemi as CMO, IBM’s NewCo taps Maria Bartolome Winans for CMO, Voss names Rachel Chambers SVP of marketing and more.

Visa Promotes Danielle Jin To Head Of Marketing, APAC 

Visa has elevated Danielle Jin, chief marketing officer of Visa Greater China, to head of marketing for the Asia Pacific region.

Prior to Visa, Jin worked at PepsiCo for over five years as senior marketing director, then vice president of marketing and category for Greater China beverages.

Jin’s appointment comes after Frederique Covington Corbett, Visa SVP, head of marketing and cross border, APAC, relocated to California and took on the role of SVP of global brand strategy and planning.

McDonald’s Canada Names Alyssa Buetikofer Chief Marketing Officer

McDonald’s Canada has appointed longtime marketing executive Alyssa Buetikofer as CMO.

Buetikofer has spent the last 15 years at McDonald’s in various leadership roles, the most recent being senior director, brand content and engagement.

Buetikofer succeeds Antoinette Benoit, who departed in February after six years as McDonald’s Canada CMO.

Confluent Appoints Stephanie Buscemi Chief Marketing Officer

Confluent has hired Stephanie Buscemi as its new CMO.

Previously, Buscemi worked at Salesforce for nearly seven years, most recently as EVP and CMO.

IBM’s NewCo Taps Maria Bartolome Winans As Chief Marketing Officer

NewCo, an independent company that was created following the separation of IBM’s Managed Infrastructure Services business, has named Maria Bartolome Winans CMO.

Winans’ career at IBM spans 30 years, with her most recent role as CMO for IMB Americas.

Voss Hires Rachel Chambers As Senior Vice President, Marketing

Voss has announced the appointment of Rachel Chambers to SVP, marketing.

Chambers joins Voss from Perfetti Van Melle, where she was VP of marketing, US and Canada, leading the Airheads, Mentos and Fruit-tella brands.

Republic Records Hires Ben Facey As Executive Vice President, Global Marketing And Digital Strategy

Republic Records has appointed Ben Facey as EVP of global marketing and digital strategy.

Previously, Facey was the head of international marketing and media for Universal Music Australia.

Overstock Names Elizabeth Solomon Chief Marketing Officer

Overstock has named Elizabeth Solomon as CMO.

Solomon joins Overstock from Amazon, where she served as the head of marketing for its global private brands portfolios.

Consumer Spend On Digital Audio Subscription Services Surged 40 Percent In 2020

Worldwide, consumers spent $2.012 trillion on media content and technology in 2020, a 6.1 percent increase from 2019 driven by COVID-19 lockdowns, according to a new report from PQ Media, “Global Consumer Spending on Media Forecast 2020-24.”

In 2020, total consumer spending on media content rose six percent to $777.39 billion, while total spend on media technology grew 6.1 percent to $1.235 trillion. The surge marks the fastest expansion in both global and US consumer media and technology spending in five years, fueled by increased spending on streaming audio and video subscriptions, as well as digital and console video game software and hardware.

PQ Media estimates that consumer spend on digital media increased 10.4 percent in 2020 to $1.432 trillion. Of the 28 digital media categories, the fastest growing was digital audio subscription services, ballooning 40 percent to $30.98 billion globally—an increase largely driven by the popularity of podcasts. Spotify added 74 million new subscribers in 2020 following its acquisition of ‘The Ringer’ and exclusive rights to ‘The Joe Rogan Experience.’ Plus, Amazon and Audible added over 100,000 new and original podcast channels and shows with celebrities.

Over-the-top (OTT) video services, including streaming video subscriptions and SVOD programming, was the second-fastest growing digital media category, surging 30 percent. With consumers stuck at home for longer periods, Netflix added 26 million global subscribers in the first half of 2020 compared to just 12 million in the first half of 2019. Disney+ gained nearly 75 million subscribers by the end of the year.

Digital media content devices generated $440.5 billion, making it the largest of the nine major digital and traditional media platform categories. Digital content subscription services grew nearly 21 percent.

Consumer spend on traditional film and home video plunged 46 percent to $43.05 billion. PQ Media predicts it will never again reach the level it did in 2019–$85 billion.

Movie ticket sales will soon see an uptick only due to the staggered premieres of films that were forced to stop production during the pandemic. Some studios including Disney and Warner Media were wise to pivot, launching several hit blockbusters via OTT video services. Disney+ debuted Mulan and Soul while Warner Media released Wonder Woman ’84 on HBO Max in addition to theaters.

Even before the launch of PlayStation 5 and Xbox Series X in Q4, digital video game software and hardware spending on multiplayer online games, in-game microtransactions and traditional console-based gaming all jumped.

Among the 14 traditional media and tech categories, cable TV subscriptions remained the largest at $220.6 billion, followed by print books and directories, which was the fastest growing in the category—up by nearly eight percent.

US consumers spent the most on media, a total of $472.16 billion, followed by China, Japan and India.

Listen In: The Fountain Of Age

Tim Parr, Founder and CEO of Caddis Eye Appliances is fighting the good fight. With culture obsessed with the fountain of youth and marketers seemingly focused only on Gen Z and Gen Alpha, an attitude of “anti-anti-aging” can be downright revolutionary. 

Tim puts it like this: trying to cling to youth is “inauthentic.” And in terms of marketing, authenticity is key. “Authenticity and clarity of mission and transparency… those things are not going away. And thank God.” 

Tim explains how a trip to the optometrist gave him the “vision” of Caddis, why he rebranded his eyewear as ‘eye appliances,’ and explores often overlooked insights into aging purchasers and what the future of the demographic holds for marketers, including the ability to be disrupted. “The fictional construct of age [in America] needs a deconstruct.”

We conclude the conversation by examining a number of misconceptions about ‘the silver economy’ and how to reach this demo.

About Listen In: Each week on Listen In, Bretz and a rotating cast of hosts from Ayzenberg will interview experts in the field of marketing and advertising to explore uncharted territory together. The goal is to provide the a.network audience with actionable insights, enabling them to excel in their field.

Instagram Rolls Out New ‘Live Rooms’ Feature

This week in social media news, Instagram debuts a new ‘Live Rooms’ feature and Pinterest rolls out a new ‘Pinterest Shop’ collection and fund to support small, female-owned businesses for International Women’s Day.

Instagram Rolls Out Live Rooms Feature For Live

Instagram has launched a new Live feature called Live Rooms, giving users the ability to go live on the platform with up to three people at a time.

Why it matters: The pandemic led to a surge in Instagram Live usage as an alternative to FaceTime. This new feature will allow creators to explore more creative avenues, such as hosting talk shows, jam sessions and tutorials. It will also give business-savvy users the ability to increase reach, grow ventures and earn more money when followers purchase badges, shop items or donate to fundraisers.

The details: To start a Live Room, users can add a title then tap the Rooms icon to add guests—either from a list of people requesting to be added or by searching for them. To prevent intruders, Instagram has made it so that users with revoked access or those that have been blocked by any of the active participants in the Live Room can’t join the session.

Pinterest Empowers Women Through New Pinterest Shop Collection, Fund

Pinterest is celebrating International Women’s Day on March 8 with a new Pinterest Shop collection comprising over 25 female-founded small businesses and products made by women. It also launched a fund to help female business owners succeed.

Why it matters: Research shows that women have been disproportionately impacted by the economic fallout from COVID. In December 2020, they accounted for 100 percent of US jobs lost.

The details: With women turning to Pinterest to navigate recent changes, search trends point to the need for support now more than ever. Pinterest says that searches for “support small business” increased 4.5 times, AND searches for “women supporting women” increased by twofold. 

In addition, Pinterest has committed to matching donations from employees to nonprofits empowering women, like the National Domestic Workers Alliance and the Global Fund for Women.