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7 min read

Unlock business growth by adopting Customer Value Optimisation

This article was updated on: 19.03.2024

Customer Value Optimisation (“CVO”) is a marketing and sales approach in which additional focused effort is put into each prospective customer, particularly in digital and other addressable media, to maximise satisfaction and value from the point of acquisition throughout the entire customer lifecycle. Customer Value Optimisation is a strategic approach focusing on building lasting relationships and generating maximum value across customer experience, acquisition and retention. 

Whilst there should always be a focus on driving efficiency in all marketing work, too often, we see an exorbitant amount of focus and budget spent on new customer acquisition. In contrast, efforts focused on conversion, loyalty and advocacy can fall short. Businesses can reduce customer acquisition costs (“CACs”) and grow more effectively through better loyalty and retention by taking an approach grounded in customer value optimisation. 

Customer value optimisation is an approach that comprises a range of digital marketing practices taken mostly from conversion rate optimisation (“CRO”) and marketing automation, in partnership with other digital media ads and activations. When conducting Customer Value Optimisation approaches you should expect to achieve more from your existing media mix, as you will focus on the traffic, prospects and customers it generates more. Customers benefit, too, through better and more tailored digital experiences. 

What are the outcomes of a Customer Value Optimisation strategy? 

American business advisor, speaker and author Jay Abraham (and common wisdom) once said, fundamentally, the only 3 ways a business will grow are:

  1. Increase the number of customers
  2. Increase the size of the transaction
  3. Increase the frequency of purchase

These are precisely the types of outcomes CVO approaches seek to maximise through experience optimisation, increased identity resolution, and proactive focus on building lifetime value. 

The outcomes from this, when taking into consideration the costs and energy associated with the investment, are:

Increase the number of customers

To grow, you need to get more potential customers to see your brand. This means increasing your share of the attention in the market. This should be done through a combination of both brand-focused and performance advertising. Another step on the journey as users interact with the website once they become aware of the brand is identity resolution. This involves capturing first-party data to leverage remarketing and CRM. 

Building and streamlining customer experience, paying particular attention to the website is vital to ensure your digital shop is pristine and customers flow through it in working order.

Increase the size of the transaction

A customer-focused website experience will convert faster through digital experience optimisation, experiments, tailored or personalised user journeys, and more. Priming users through communications, well-thought-through pricing strategies, and upsell experiences can help reduce price sensitivity. Running experiments throughout the customer journey and website can help better build out their upsell opportunities. Thoughtful placement of complimentary products and services can help drive up basket values.

Increase the frequency of purchase 

Removing friction and barriers to purchase can increase purchase frequency. Reducing or eliminating delivery costs can help increase service usage. Tailoring communications and promotions to meet customers’ needs, expectations, and life cycle stages. Experimenting with tailored communications can keep users engaged and coming back frequently. Messaging framing can help to increase product usage and, therefore, repurchase.  RFM modelling can support here where there is a strong comms and ad tech capability (repeat purchases – loyalty)

Multiple studies confirm that increasing customer loyalty by as little as 5% can increase profits by anywhere from 25 to 95%.  Customers who’ve had a very good experience are 3.5x more likely to repurchase and 5x more likely to recommend the company to friends and relatives (than if they’ve had a poor experience).

What are the broader benefits of Customer Value Optimisation?

There are multiple broader benefits to customer value optimisation. Most of these are derived from a better relationship and understanding of the customer. For example: 

Increased customer retention:

By modelling customers’ data based on their purchases and communicating and inventing on their behalf based on their intent. We can continuously innovate and build stronger relationships with our customers. This is done through personalising communications and proactively engaging with customers and their feedback. 

Increased brand perceptions:

Friction and disappointment in the customer experience can cause customers to stop using your business, impacting their perceptions of your brand. By understanding friction points and experimenting with psychology we can delight customers and turn them into brand advocates.

Increased ROAS:

Segmenting customers effectively with a customer data platform means that businesses can be more efficient and effective with their targeting of customers because they can feed behavioural data into the segments themselves, making them highly relevant to the customer. This approach opens the door to multilayered marketing communications approaches utilising email, social media, Google ads and push notifications to name just a few. 

Improved online reputation:

By gathering customer feedback and understanding the end-to-end customer journey, we can understand how to refine touch points and build advocates. We can encourage customers to leave reviews and shout positively about us online. 

Experimentation & learning: 

This approach opens the door to integrate experimentation campaigns and helps CRO programs evolve beyond simplistic conversion metrics. Multi-channel experimentation allows one to learn what works and what doesn’t from a marketing communications perspective.

Making the most of a Customer Value Optimisation strategy

To make the most of your CVO strategy, you may want to consider investments in at least some of the following research, technologies and approaches. This is all in addition to media spend and investments made for new customer acquisition, which many companies and their agency partners do well already. 

Customer Data Platform

Customer segmentation is a key feature of CDPs that allows for effective customer targeting. By categorising customers based on their behaviours we can increase their lifetime value and can streamline advertising spend.  Value-based segmentation, for example, by RFM modelling allows us to treat customers differently based on their value to the company and their position in the customer life cycle. Customers of higher value should be protected, new acquisitions nurtured and regular customers upsold. Utilising the latest in artificial intelligence and machine learning features such as propensity modelling and recommendation engines for activation on-site can deliver a personalised relevant message to the right customer based on their previous behaviours at the right time. 

Insights & Research

By modelling behavioural data, we can understand the users’ intent on the website. This can be used to understand customer affinity towards products and services. Understanding the end-to-end customer journey allows us to map the opportunities and pain points across the customer journeys. By optimising the full funnel, we can increase sales and improve brand perceptions.  We can use qualitative research to gather customer feedback in their own words using interviews, UX labs and surveys to gain rich insights into customers’ perceptions.  We can build surveys and other customer feedback loops into communications to help manage and build an online reputation. 

Marketing Automation Platform 

Including efforts on-site for increased identity resolution, meaning increased data capture for prospects or “warm leads” ahead of them making a full commitment or purchase. With this increased identity graph, and the appropriate consents, personalisation and some communications can begin with a larger pool of potential customers.  One of the critical facets of making good use of a marketing automation platform is driving constant data capture and identification of users on the website. Given cookies’ slow demise, utilising first-party data to enrich marketing campaigns and the digital experience is becoming the standard procedure. To drive sign-ups it’s essential to offer customers value and a reason to believe that handing over their email address and data will help them achieve their goals. Email marketing should be fundamental to any company’s marketing automation efforts. Email offers a highly cost-effective way of opening dialogue and establishing relationships with customers. 

Experience experimentation toolkit 

Experimentation can be used to gather insights and refine marketing communications. Experimentation can refine the mix and frequency of communications to get the optimum amount of spend per lead. It can also make campaign content, creative and landing pages more effective at converting customers. Various types of software can be used to execute experiments, ranging from bespoke research, experimentation and personalisation software (VWO / Optimizely) to CPM software that allows experimentation across marketing communications as well. Including CRO A/B testing software (Bloomreach). Customer solutions are available for companies looking to get started in experimentation that allows code to be injected with Google Tag Manager. All traffic ultimately flows towards a website, so the biggest win in terms of experimentation is optimising the website based on the traffic landing towards goals such as revenue per user, conversion and data capture.