Lifetime Tracking Maintains Value in Customer Relationships
One of the critical metrics used by marketers is lifetime customer value (LCV). This metric looks beyond the short-term revenue generated by a specific campaign and includes the potential revenue generated over the lifetime of that customer relationship.
For example, when someone buys a car from an auto dealership, that dealership knows it has a huge opportunity to gain significantly more revenue if it can get that customer into its service department.
Why? Dealerships know that once people choose a mechanic, they tend to stick with them. If dealers can get a new owner into the shop once, they have a good chance of retaining their business over the lifetime of the ownership of the car. Taken together, the revenue from the car’s routine maintenance, inspections, tires, and repairs has the potential of earning the dealership more profit from the service than from the sale of the car itself.
This is why you see more and more auto dealerships setting up personalized reminder programs for all of their auto and service department customers. They know the makes, models, and mileage of each car, and based on that information, what types of routine maintenance and inspections should be conducted and when. Every week, they send out well-timed letters personalized by auto owner name, make, model, and mileage of the vehicle, and offer a discount for bringing the car in.
For example, a 2008 Ford Taurus owner might get a reminder something like this:
Bob, did you know that your 2008 Taurus is due for a 60,000-mile inspection? Keep your car safe with routine checks of your steering, brakes, and tires. Bring in this coupon and save $25!
Does it cost more to send personalized mailings than generic postcards? Absolutely! But all that dealership has to do is retain a handful of customers, and over the lifetime of the ownership of those cars the campaign will have been enormously profitable. That profit may not show up at the first oil change, but dealerships are looking at the profitability over the long haul.
Are you tracking the lifetime value of gaining a new customer?