E-Mail : What's That Contact Worth?
Using e-mail to build lifetime customer value
November 2008 By Loren McDonald
A low-LCV customer segment might include users with only a single checking account, but who are frequent users of human tellers at local branches. A targeted e-mail program could be developed to educate this segment on the benefits of online or telephone banking and to promote CDs and savings accounts. The goal for this segment becomes increasing share of wallet and reducing customer service costs.
Retail—Probably nobody understands better than a retailer about segmenting customers based on their LCVs. Macy's, for example, distributes benefits among its store credit card holders according to their previous year's purchases. The more they spend, the more rewards (specialized promotions, free gift wrap, private sales and discount days, etc.) they receive. In this example, e-mails can be used to promote these benefits to customers at reward threshold levels and to reduce the costs of fulfilling the program.
Online Publishing—Many online publishers have free and paid versions of their services. Moving low-value free users into basic or premium paid services is a common goal.
These initiatives can help target that lower-LCV segment and move them into a higher-value segment:
Be careful not to assume that the customers who are your most active e-mail users are also your highest-value customers. Those who open and click most frequently are not necessarily those who convert from e-mail. For example, if your e-mail program relies heavily on discounts and free shipping to drive sales, you may be reducing the profitability of high-value customers who are more likely to purchase without incentives than are their lower-value counterparts.
Retail—Probably nobody understands better than a retailer about segmenting customers based on their LCVs. Macy's, for example, distributes benefits among its store credit card holders according to their previous year's purchases. The more they spend, the more rewards (specialized promotions, free gift wrap, private sales and discount days, etc.) they receive. In this example, e-mails can be used to promote these benefits to customers at reward threshold levels and to reduce the costs of fulfilling the program.
Online Publishing—Many online publishers have free and paid versions of their services. Moving low-value free users into basic or premium paid services is a common goal.
These initiatives can help target that lower-LCV segment and move them into a higher-value segment:
- Solo offers for free samples of paid issues, free demonstrations or trial subscriptions.
- Free excerpts of paid whitepapers.
- Free versions of paid newsletters, including a list of the extra content in the paid version.
- Incentives including downloads, as well as publication and convention discounts available only to paid users.
Be careful not to assume that the customers who are your most active e-mail users are also your highest-value customers. Those who open and click most frequently are not necessarily those who convert from e-mail. For example, if your e-mail program relies heavily on discounts and free shipping to drive sales, you may be reducing the profitability of high-value customers who are more likely to purchase without incentives than are their lower-value counterparts.
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