Today's direct marketing case study comes to us from Sigma Marketing, a Rochester, NY-based database marketing company. While I wish that they would have shared more about what went into their "Loyalty Metric" (probably it's their confidential 'secret sauce'), the message remains clear. It's important to get a handle on the true value of your customers, in order to best drive loyalty, retention and upsell campaigns.
Maximizing Lifetime Customer Value:
Major automotive manufacturer
Our client was overlooking future revenue opportunities by not recognizing the true lifetime value of its current customers. The client recognized that there were differences among customers’ loyalty over a lifetime, but could not quantify or act on those differences.
SIGMA created the Loyalty Metric, a measurement that allowed the client to make business decisions based on a real and accurate lifetime view of the customer, not a 12-month or even 60-month snapshot.
The Loyalty Metric yielded important and valuable learnings for the client:
- current customers are worth billions of dollars to the client over a lifetime;
- the top 10% of customers contribute 89% of total value;
- the highest-value customers and lowest-value customers shared many similar characteristics, but one critical characteristic differentiates the two – purchase velocity.
SIGMA discovered that the client could best utilize The Loyalty Metric in:
- the development of retention programs for high-value customers;
- taking cost-effective, pre-emptive action against potential defectors;
- creating intelligent marketing programs to effectively manage both high-value and low-value customers;
- generating additional vehicle sales at higher velocity among medium-value customers, turning them into high-value customers.