How does CLV impact a company’s digital economy?

MUMBAI, INDIA: High performing, strategic customer lifetime value (CLV) companies are influencing customers through a blend of business orientation, resource management and technology.

A new study commissioned by Avaya and conducted by Frost & Sullivan shows the impact of CLV on long-term profitability and growth of an organization.

The research into CLV identifies qualities that separate high-performing companies from others, and how customer engagement can be influenced through a blend of business orientation, resource management and technology.

Findings:

Successful CLV businesses placed the highest priority on the customer experience and the brand. They saw the contact center as the epicenter of managing customer experience and responsible for ensuring long-term loyalty.

Customer experience management (CEM) drives higher engagement and CLV because it helps improve customer satisfaction for better revenue potential, brand advocacy and longevity of relationship while reducing customer acquisition and support costs.

Three criteria to optimal CLV as indicated by the research: an omni-channel customer experience; backed by enterprise-wide team engagement and access to actionable insight at all appropriate levels.

What is CLV?

CLV is the present value of all the future cash flows attributed to a customer relationship. It includes the projected amount of money the customer may spend and such items as the cost of new customer acquisition or savings from customer retention, the propensity of a customer to refer the company to others and the cost of their loyalty.

How does it help?

Against digital transformation initiatives, measuring CLV helps companies see how see that all decisions and actions are tied together and encourages a long-term look at the customer relationship rather than short-term quarterly impacts.

For instance, according to the study, 80 percent of companies in any stage of digital transformation cite improving customer engagement as a priority. Companies tracking CLV significantly outperform others in terms of profitability and growth, the researchers noted.

Challenges:

Some of the challenges include:

•    Understanding what to track

•    Incomplete data

•    Onerous efforts needed for tracking, disjointed systems.

In accordance with the study, Avaya and F&S released a CLV calculator tool.

“Improving customer engagement needs to be a thread woven throughout an organization. CLV reflects how well that’s understood and if the right steps are being taken.  The growing investments in digital transformation strategies make it even more critical for companies to quantify the outcome of their efforts to determine if they’re on track for success,”  said Laurent Philonenko, SVP and CTO, Avaya.

"Companies today need to keep pace with a new kind of consumer, and that has everything to do with digital transformation. Generation Y is leading the way toward a digital world and a new way of spending; the rise of new channels includes everything from social, mobile, and video to automated, self-service solutions,” said Stephen Loynd, Global Program Director, Frost & Sullivan.