What do we really mean when we say we want “loyal” customers?
Let’s consider Customer A. Customer A spends $100 per month on widgets, and when she buys widgets, she always shops at your store over any of your competitors. Customer A is loyal.
Customer B, on the other hand, will wherever is most convenient or gives him the best deal. He spends $1,000 per month on widgets. Customer B has no loyalty whatsoever.
Customer C spends a whopping $10,000 per month on widgets! She does not particularly care for your store, and she will only shop with you when your competitor is out-of-stock. Customer C is clearly disloyal and spends 95% of her widget budget with your rival.
Which customer would you choose? In this case, the loyal customer is the least valuable, while the disloyal customer is the most valuable.
To identify the value of individual customers requires transactional data. While B2B companies have sophisticated Customer Relationship Management (CRM) systems like Salesforce to track these things, for many B2C companies, that task falls a loyalty program of some form. The idea is to give a little extra benefit to customers in exchange for the ability to better track important data that can be used to determine individual-level CLV. CLV insights can then be used to make more intelligent marketing decisions and to measure truer return on marketing investment (ROMI). Loyalty scheme insights can be used to identify and better serve your most valuable customers rather than your most loyal.