For companies looking to improve retention rates, customer lifetime value (CLV) is a crucial concept, but one which companies find hard to measure. 

Econsultancy's new Building Loyalty and Driving Revenue in the Digital Age report looks at this issue in more detail. 

Having surveyed almost 900 agency and company respondents, we found that, though the vast majority agreed that CLV was an important concept, just 42% said they were able to measure it. 

Here's a sneak preview of some of the findings of the report produced in partnership with Sitecore.

The vast majority of companies (89%) see customer experience as a key factor in driving customer loyalty and retention, while 76% see CLV as an important concept for their organisation. 

Of the 42% that said they were able to measure customer lifetime value, 11% of companies 'strongly' agreed they could measure it and a further 31% 'somewhat' agreed.

The Customer Lifetime Value report is based on a survey of marketers and interviews with senior executives from a range of businesses, including British Airways, Aviva, Santander and Merlin Entertainment.

One of the challenges is that many organisations simply aren’t set up to manage lifetime value, with 35% of respondents saying that the siloed nature of their organisations and lack of coherent marketing hinders their ability to increase CLV.

A third (34%) of companies felt that poor systems or lack of integration hindering customer experience was one of the most significant factors negatively impacting their ability to build CLV.

Of course, companies in different sectors face distinct challenges as they attempt to build customer loyalty.

  • Business respondents in the education, manufacturing and charities / non-profit sectors are most likely to see their customers as loyal.

  • Utilities and healthcare / pharma respondents see their customers as least loyal.

  • Companies in the travel & leisure, consumer goods and utilities sectors are most likely to say their customers find it ‘very easy to switch’.

  • Though 44% of automotive brands believe their customers find it ‘quite’ or ‘very’ easy to switch, only 11% felt customers had the potential to be disloyal, with most remaining neutral or saying customers are ‘quite loyal’ (44% each).

  • Retail respondents considered their customers to be neither especially loyal or disloyal, despite the relative ease with which they can move to a competitor.

According to Shawn Cabral, Marketing Director for Sitecore UK:

This report shows that brands recognise the importance of delivering a great customer experience, but what needs to change is for brands to re-define the meaning of customer experience, to embrace every interaction with their brand. 

It is not just about technology, but also being able to be ‘multichannel’ within an organisation. Can all the internal departments ensure that they use their data and customer insight to collect, connect and predict, so they deliver an exceptional customer experience? 

Graham Charlton

Published 8 April, 2014 by Graham Charlton

Graham Charlton is the former Editor-in-Chief at Econsultancy. Follow him on Twitter or connect via Linkedin or Google+

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Comments (4)

Matt Clarke

Matt Clarke, Ecommerce Director at B2B

Very interesting, Graham. While you can't argue with the usefulness of CLV, I wonder how accurate the CLV data is for the 42% of companies who were able to measure it?

Back in 2009, Edward Malthouse wrote a paper summarising the results of a lifetime value and customer equity modeling competition, which suggested it was actually really difficult to accurately calculate CLV. Even for expert data boffins.

Basically, 92 teams of academics and data scientists attempted to implement a range of competing CLV models to examine the same set of customer data. Only 24 teams submitted entries (which probably further goes to show how tricky CLV modeling can be). The results were quite variable and the best model for individual-level CLV prediction was out by a factor of 5.4!

It's worth a read if you're a data geek: Malthouse, EC (2009) - Journal of Interactive Marketing. Vol 23, 2009, pp 272-275.

over 4 years ago


Mark Bolitho, New Business Director - Ecommerce at more2

Hi Graham

This is an important area to highlight, and Matt's spot on too.

Over the years we've come to the conclusion that the single biggest driver of loyalty is relevance, and the best means of becoming relevant to your customers is to understand their behaviour.

It's hard to do this with a siloed operation, and more and more organisations are understanding the importance of a single view of the customer. Lifetime value is the next step, which also unlocks the very important insight of how much to spend on acquiring new customers. We find most businesses could actually spend more.

I've got some reading to do, following your reference as we speak, Matt!

over 4 years ago

Pete Austin

Pete Austin, Founder and Author at Fresh Relevance

Good idea. We (and maybe other real-time marketing services) already provide proxies for "lifetime value", such as the total value of products that shoppers browse and buy in any period - and whether they are top customers.

Which means that, if companies need to know the lifetime value of visitors to their web store, they can get a good approximation very cheaply. But I appreciate this is not a total answer ("top customer" is OK for marketing, but hardly a fine-grained measure!).

I've added "lifetime value" to our development queue for later this year.

over 4 years ago


Mitchell Round

I'd just add to Matt's point about the companies claiming to be able to measure CLV.. It's a Spectrum, & it's level of sophistication (and therefore it's value) can vary widely so I'd be interested to read more about where the respondents would place themselves on a CLV maturity curve.

I find the beauty is in the refinement & optimisation of CLV once the initial grunt work of data quality & Single Customer View have been achieved - although if you were to ask one of our data scientists I'm sure they'd say quite the opposite ;-)

over 4 years ago

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