Acquisition Metrics Beyond Customer Lifetime Value

Many marketing teams focus on Customer Lifetime Value (CLV), which provides a “guiding star” that can help determine how much you should spend to acquire a net new customer. Lifetime value is often defined as something like:

Average Spend per Purchase

  • Average Number of Purchases per Year
  • Direct Marketing Costs per Customer per Year
  • Average Gross Margin
  • Average Customer Retention Rate
  • Annual Discount Rate

The reason for the equation is fairly simple: marketers want to ensure the lifetime value of an existing customer is higher than the typical marketing and operations costs needed to acquire a new customer.

Companies act as though customer value ends when they stop paying, when they stop using the service or product, or simply after a customer makes the purchase.

What would your customers think if they got a glimpse into your CRM?  It probably wouldn’t be too pretty. Remember how Huckleberry Finn felt watching his own funeral? It wasn’t pretty.

I’ve seen companies label customers in their CRM system in a variety of pejorative ways. How would you like to be referred to as an “End-of-Life User,” an “Ex-Customer,” a “Former User,” or simply a “Customer”? None of these monikers seem very flattering.

For a while now, the SaaS business model has driven companies to embrace the concept of customer centricity. SaaS and B2B companies are becoming more customer centric to hold onto customers longer. At the same time, organizations have started investing in and analyzing the journeys their customers take to see how they can increase revenue.

Often an organization will measure Customer Lifetime Value in a fairly linear way. It goes like this: a prospect becomes a customer/user, then stays on as a customer/user; at some point they may fall off and stop being a customer. In this view, the “Customer” Lifecycle ends when a customer is no longer a customer.

Companies naturally take this approach to value because they only have a certain amount of control over their customers or users (“users” do not always equal “customers”); in B2B, the user’s employer is the customer). These companies lose track of their users as they move on to other jobs, other products and other employers. In my experience, organizations typically lose touch with the end user, and mark them as “No longer a user/customer” in the CRM system and forget about them.

Let me introduce a different approach. I call it Advocate Lifetime Value.

The idea behind Advocate Lifetime Value is to measure the value of a user/customer not just while they are customers, but also continuing to track and understand their value based on their actions such as word of mouth referrals, reference calls, and “beach heading” new opportunities at different companies that they may join in the future.

So, with that concept under our belt, here are some questions:

  • How many of your current end users are going to move to a new position this year?
  • How many customers refer new business to your sales team when they join a new company?
  • How many users move to other companies who are not yet using your product/service?
  • How do you track advocates who are not, nor will ever be customers such as investors, partners, and analysts?

Customer advocate life cycleAs you can see, there are many potential leaks in the customer lifecycle. If you can create advocates of your service or product, there is an opportunity to dramatically increase the value of former customers who are still advocates. A lot of companies don’t do this because it can be hard.

CRM systems aren’t great at tracking contacts as they move from company to company—and that’s for a very good reason. They are focused in the “C” in CRM. CRM systems aren’t designed to follow a person through their career changes. Rather, they’re designed to track leads and current customer interactions.

Do you have your investors and partners as contact records in your CRM system?  They are your advocates too.

The power of an advocate marketing platform like Influitive’s AdvocateHub is the use of social media sign-on to maintain relationships with your end users even as their careers evolve. Your users will continue to use LinkedIn as they move to different companies and careers. This lets you maintain the relationships with your advocates, regardless of their status as a customer.

Your former users are still a valuable resource. The approach they took to buying your software remains invaluable as they talk with a current prospect on a reference call. Their case studies are still valuable and tell a story. Their video testimonials continue to speak to their passion about your product. And the friends and colleagues they’ve referred to your company are still valuable leads.

Advocate Lifecycle

Don’t get stuck in the box of measuring and optimizing just your customer’s lifetime value. Plan and embrace the long-tail of your user’s value by observing and optimizing for a user’s Advocate Lifecycle, which can continue to show value years after they’ve stopped being a customer or even an employee.

The Advocacy Lifecycle goes beyond the typical Customer Lifetime Value.

An advocacy program like one built on Influitive’s AdvocateHub enables your end users to move to new companies but continue to advocate for your company. Your advocates can easily maintain a connection so that they can bring you in as a new supplier or continue spreading the word about you to colleagues and peers. In turn, you’ll be able to track and measure the true lifetime value of your advocates—an invaluable resource.