Creating customers for life
"I really love renewing my car insurance," said no one, ever. Along with taxes and reconciling your checkbook, it falls on the list of mandatory tasks that bring you little joy. Now, a Dutch company is doing its utmost to change that dynamic.
Achmea is one of the largest financial services companies in the Netherlands, specializing in insurance. It pays close attention to the age of its subscriber vehicles. When records indicate a car might be getting older, the company contacts customers and suggests reducing their coverage to save a few euros.
Unlocking long-term customer value
The short-term sacrifice is part of a long game. Achmea is an example of a forward-thinking company that is viewing its customers in a new light. Instead of focusing on just the next sale, it is targeting customer lifetime value (CLV), which describes a customer's total worth to the business throughout their entire relationship.
This means potentially foregoing some short-term revenues, but Achmea is determined to do whatever it takes to develop a long-term relationship, explains Jeroen Dijkstra, the company's manager of omni-channel personalization.
"If the customer stays with you for the long term, you have more opportunities to cross-sell other products to them over time," he says. "Our focus is on making the customer happy and driving lifetime value."
CLV is a metric that will feature heavily in the future of marketing. Gartner expects marketing budgets to hit 9.5% of company revenues this year, up from 6.4% in 2021. Much of that increase will fund programs and technologies that build long-term customer relationships.
Pega's 2022 "The future of marketing" survey polled 750 marketers across multiple industries. It found 25% of them are moving beyond one-time sales and ROI to emphasize CLV. Another 60% plan to do so in the future.
The power of personalization
A key to accomplishing that will be to move beyond spray-and-pray marketing campaigns targeting large demographic or behavioral segments, the study indicates. Such methods are rarely effective and can even aggravate customers if they receive too many off-base or ill-timed messages from a brand.
Instead, CMOs will shift toward better understanding their customers to deliver more personal experiences. They will focus on metrics that measure one-to-one interactions. For example, 39% of survey respondents expect to have KPIs for reducing customer attrition, 28% will be expected to boost customer cross-selling, and 27% will be expected to increase registration for company events.
"Every customer should feel their interactions with us are meaningful, personal, and adapted to their needs," agrees Curig Johnston, a marketer specializing in personalization for British telecommunications giant BT.
Nevertheless, driving enduring relationships won't just involve individuals. Curig's team tailors communications to entire households as well. After all, many subscribers sign up for telco services through family plans, making it more important to personalize communications in context with relatives, he explains.
BT's approach allows it to examine a household's combined value across a range of products and services. It also ensures that families and individuals alike have consistent experiences. If one family member receives a device upgrade offer toward the end of a contract period and another does not, it could lead to confusion, alienation, and missed sales opportunities.
BT heads off this chaos with its welcome journey, an educational onboarding program that helps customers understand the benefits of their plan from the beginning. It also highlights how to connect as needs or issues arise. In short, it's a CLV hub.
"The welcome journey has effectively doubled customer engagement and reduced the drop-out rate by a factor of four," Johnston says.
Marketers say that after an initial engagement, the ability to connect with customers consistently and regularly across every channel they visit is increasingly important. Pega found 76% of marketers are still prioritizing social media marketing strategies, but their omni-channel approaches will also focus on mobile and personalized techniques, influencers and video marketing, and experiential marketing.
The medium won't be the only factor; the messages will also change, according to Pega's survey. Brand marketers are moving beyond traditional sales and service messaging to position themselves as thought leaders.
Investing in new technologies
Personalization plays a key part in this approach. A tech company promoting its environmental expertise might share advice for reducing energy consumption based on a customer's specific energy use history. A bank could demonstrate its economic prowess by sending notes explaining the inflation crisis and offering tips for navigating it based on a depositor's spending habits.
Leveling up personalization to drive CLV will require new technology, as 57% of respondents in the Pega survey expect to invest in it to support their marketing digital transformation. Half say they will have to become more digitally savvy, while nearly 40% believe marketing will have to step up collaboration with IT departments to get the job done.
Intelligent automation will be an important technology in personalizing interactions, and 70% of customers expect to invest more in this technology. It includes the low-code platforms that allow them to create what Achmea's Dijkstra calls a "personalization brain," or real-time interaction management (RTIM) platform. Forrester defines this as marketing technology for delivering contextually relevant experiences, value, and utility at the appropriate moment in the customer lifecycle via preferred customer touchpoints.
Dijkstra has added several other technologies that help to deliver more complete CLV, including email marketing and content management software, third-party and in-house analytics tools, and an automated customer experience and call center solution.
Empowered customers are happy customers
These are the technologies that enabled Achmea to track the age of cars and offer ways to save money on auto insurance. They also underpin self-service tools that let customers see if their policies align to their needs.
These tools help maintain ongoing relationships with customers, especially at renewal time, Dijkstra says. "A lot of people are unhappy because their premiums might be increasing. We found it difficult to explain why in a letter." The company offers an app that customers can use to see if their insurance coverage still fits their needs.
"There is, of course, a risk some customers will decrease their premiums," he admits. "But if the end result is the customer is happy, then they stay with us, and we are happy."
Many marketers also expect AI to bolster CLV. It can mine customer behavior to generate actionable insights that deliver more personalized experiences. But, as BT's Johnston notes, organizations must spend considerably more time getting their data houses in order before it can deliver that kind of value.
"You've got to start with the data, because, at the end of the day, you can't have artificial intelligence without a good data foundation," he says.
The Pega survey indicates marketers also have growing interest in Web 3.0, the next generation of the internet. This will be a more decentralized version of the web, moving it beyond the control of traditional centralized platforms. It will rely on decentralized financial tools such as cryptocurrency and non-fungible tokens (NFTs) – with blockchain, a digital ledger, underlying it all.
Web 3.0 is still evolving, and most marketers aren't sure how they'll make use of it. But, at a minimum, most see it as an additional key channel for delivering personalized experiences that generate CLV. NFTs, which are certificates certifying ownership of unique digital items like art or songs, could also be used as incentives in sales promotions, loyalty programs, and get-out-the-vote campaigns.
Marketers say driving CLV will always come down to the basics. That means understanding what's on customers' minds and finding ways to personally serve and meet their needs. It includes applying the right technologies to deliver exceptional experiences quickly, efficiently, and affordably.
No marketer has CLV all figured out, but most intuitively understand its importance. They know they'll need a mix of new and existing technologies to unlock more value over a customer's entire lifecycle and stay ahead of the competition. Brands that don't invest are likely to fall by the wayside.