The cooler months may see the temperature drop, but things are heating up in the retail and B2C world: consumer demand for goods and services sees a serious skyrocket in popularity, as customers get ready for the gift giving of the festive season. Black Friday and Christmas both offer incredible opportunities for businesses to form new connections, make impressive sales, and watch their profits soar - this really is a time of harvest for those who know how to make the most of the seasonal rush.
This is also, however, a period where caution can be wise. While it can be tempting to throw all that you have into a flashy marketing campaign and heavy run of discounts to draw in the Black Friday and Christmas crowds, take a moment to consider some key questions: what kind of customers will you be attracting with this campaign? Are they the kind of customers that you want to retain within your business? And, perhaps most importantly, will these customers stick around in the long term, once the lights of Christmas are over, and the grey days of January are looming?
Understanding the concept of "lifetime customer value" can make a huge difference to your overall profit, and long-term success of your business. But just what do we mean by that, and what tactics will help you achieve better profit? We took a closer look at all you need to know to attract customers for life – and not just for Christmas.
No time to read? Watch our Digital Marketing Answered video to find out all the best tactics for more profitable sales this Christmas:
In simple terms, lifetime customer value relates to the overall revenue that you can enjoy from customers across the lifetime of a long-term relationship as opposed to a one off sale which will be less profitable. Essentially, this translates into a business model that emphasises customer loyalty and satisfaction, rather than focusing on immediate sales and a short-term boom.
Lifetime customer value is calculated as the overall revenue that you will get from a customer throughout their lifetime relationship with your business. To calculate your average LCV or LTCV, you will need to understand how long on average customers shop with you and how much they tend to spend. You might discover different types of customers with different patterns and start creating different cohorts with separate LCV.
Looking at lifetime customer value is important as it helps to calculate a more accurate return on investment (ROI). If you focus on one-off sales, you might get a lot of revenue at once, but you’ll have had to pay a high acquisition price for this one-off revenue, making your ROI lower. On the other hand, if you can get a high lifetime customer value from your customers, you might be able to have a higher acquisition cost, but your overall ROI will be greater since they’ll spend more money in the long run. Your acquisition cost only happens once!
The key to achieving lifetime customer value is to focus your marketing efforts on building relationships with potential customers, rather than just simply trying to make the sale. This means offering quality goods and services, building a strong, positive customer experience, and using data and insights to create truly targeted campaigns - all of which will help to create a strong brand identity, and draw customers back time and time again.
One of the biggest traps that businesses can fall into when attempting to attract customers during the busy Christmas period is offering discounts, sales, and promotions. While these may seem like sure-fire ways of getting people through the door, think carefully about the implications: are these really going to bring in customers who will stick around, or are they merely providing a short-term fix?
Some of the main issues that can arise with discounts include:
While discounts may seem like a great way to get customers through the door, they can also lead to businesses having to sell more products or services in order to make up for any reduced profit margins. This can be an extremely difficult balance to strike, and one that is easy to get wrong if not managed correctly. As an example, if you offer a 50% discount, you automatically halve your profit, and must sell double the amount to make the same amount of money.
Another risk of discounting is that it can devalue your brand, and lead customers to expect lower prices in future. If you offer discounts too often or for too long, customers may come to expect them as part of your service - making it harder for you to make a profit in the long run.
Finally, offering discounts may also attract customers who are motivated purely by price - meaning that they may not stick around once the discounts have gone away. This can lead to a short-term gain in sales but can actually harm your business in the long run - as you may gain customers who are not interested in your brand and products.
Instead of offering discounts, there are several alternatives to attract customers this Christmas:
As mentioned earlier, the key to attracting loyal customers is to focus on building authentic, long-term relationships with them. This could involve offering personalised services such as tailored recommendations, based on clear data – as we will discuss in just a moment – as well as simply offering excellent, reliable service.
Offering quality goods and services is also key to gaining loyal customers - so make sure that you are providing a good standard of customer service, and products that will really stand out from the crowd. This includes offering unique features or guarantees that will make customers feel secure in their purchase, and building a brand reputation based on quality, reliable products or services that you can really trust.
It is also crucial to provide excellent customer experiences - even at busy times such as Black Friday and the Christmas rush. Keep a close eye on stock levels, and make sure that you are consistent and reliable with delivery times and estimations, while ensuring that customer requests are handled quickly and efficiently by skilled, experienced staff. By focusing on providing a great customer experience, you can make sure that customers keep coming back.
One of the most effective things you can do to attract the 'right' type of long-term customer is to use data to build smart campaigns. This starts with identifying cohorts according to acquisition behaviour, including activities such as opening emails, clicking links, or visiting pages - and this can be used to target more relevant ads and offers.
There are a few stages to this process:
Start by analysing your customer data to identify what types of products or services they are buying. This could include looking at the frequency and value of purchases, as well as the types of items being purchased. As an example, you may be a garden centre selling flowers - and the data shows that 80 people purchased pink flowers - and nothing else, but that 50 customers purchased orange flowers - plus several other purchases throughout the year. In this case, you will be looking to target customers who are interested in orange flowers as they will be more likely to provide a long-term revenue, and present a larger potential for long-term profit.
The next step is to break down your campaigns to analyse the sources of customers. This could include looking at traffic from organic searches, paid ads, email campaigns, social media posts - and so on. As an example, if you find that 20% of new customers came from an ad campaign you ran on Facebook in October - it's likely this is where you want to focus your efforts going forward for that specific group – but we can break this down further, as we shall see.
Remember, you want to attract customers who are interested in your brand and products for the long term - so use the data to create more targeted campaigns that focus on quality, loyalty, relationships, and value. As an example, it may be fairly useful to classify customers based on how much they spend in one go - but this doesn't allow you to gather any more information or data to produce a more tailored, personalised campaign.
Returning to the garden centre example, knowledge is power; there is a wealth of data that can be used to inform future marketing and plan campaigns – for example, you may wish to know how large their garden is, as there is no point in selling a ride-on mower to someone in a small, bricked yard. Perhaps it would be useful to know if they have children, whether they grow their own veg, or if they have pets - all this data can be used to craft campaigns that appeal more directly to each customer, allowing you to recommend trampolines and play equipment to parents, allotment gear to home growers, and pet-friendly plants to dog lovers.
By analysing data and purchase history, you can gain a better insight into customer behaviour, and create a more relevant, personalised message that appeals to them.
So, just how do you get hold of this valuable data? There are a few options, including:
For existing customers, start by looking at past purchases and the trends that can be seen. This will give you a good idea of who is buying what, and whether there are any patterns or links that could be used to create more targeted campaigns.
Next, look at where your traffic is coming from - this will give you an indication of which sources are proving most successful. You may be surprised to find that certain campaigns are driving more traffic than you thought - or, conversely, that some channels aren't working as well as expected.
Another great option – particularly for new customers - is to use test content that covers a few topics and see which one resonates with your target audience the most. This could include running several ads with different messages on social media and measuring the result, or using email campaigns to test which subject line or blog link gets the most opens.
Finally, it's important to ensure you're tracking key metrics such as open rate, click-through rate, conversion rate - so you can determine which campaigns work best for each type of customer, and refine along the way.
When it comes to long-term business success, the right data is more valuable than gold dust.
By leveraging the data at your disposal, you can transform your Christmas campaigns from a one-off event to an ongoing, consistent, and effective approach that will keep customers coming back year after year. Gaining a real understanding of your customers' needs and desires will enable you to craft content that resonates with them - helping you to drive sales, loyalty, and long-term value.
Here at Innovation Visual, our goal is to help you do just that. Our dedicated experts are on hand to help you gather the right data, perform relevant analyses, and use these insights to craft holistic campaigns that are focused on delivering greater LCV and ROI, throughout the year. All this to ensure that your business is top amongst competitors for many years to come. Get in touch and see how we can help.
This festive season, take time to remember that a customer is for life - not just for Christmas. By making sure you're using the power of data to drive your campaigns, you can ensure that your customers will be with you for many Christmases to come.