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Tracking Success in the Digital Economy

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Laura BassettBy Laura Bassett

The investments being made in the pursuit of a more digital enterprise are major: In the U.S. retail banking sector alone, 2015 investments in technology, services and resources are on track to reach $16.6 billion, with a combined annual growth rate (CAGR) of 10.4 percent into 2019. To know whether all this spending is having the intended effect, resellers must help customers identify and measure progress toward key objectives. For 80 percent of companies, one of the priority goals for digital evolution is to improve customer experience and engagement, according to research conducted by MIT Sloan.

But how can companies effectively measure, and then influence, their digitalization strategies and investments to see whether they’re having the intended effect on customer engagement?

Research by industry analysts Frost & Sullivan and Avaya demonstrates the value in using customer lifetime value (CLV) as a means to track success in the digital economy. The research identifies qualities that separate high-performing companies from others and looks at how customer engagement can be influenced through a blend of business orientation, resource management and technology.

Defined: What Is CLV?

Customer Lifetime Value is the present value of all the future cash flows attributed to a customer relationship. It is a framework involving multiple, interconnected data points, some of which organizations may not necessarily already track. In other words, it’s a prediction of the net profit attributed to the entire future relationship with a customer. Quantifying and measuring CLV helps businesses see that all decisions and actions are tied together and encourages a long-term look at the customer relationship rather than short-term quarterly impacts.

In addition to out-and-out spend, other factors include the propensity to refer others, the cost of their loyalty, and the reduction/elimination of new customer-acquisition costs via customer retention. Perhaps not surprisingly, those who measure CLV outperform non-users when it comes to customer experience, loyalty/retention and advocacy, revenue and profit growth.

From a digital-enterprise perspective, using and measuring CLV underscores one of the primary drivers for these investments: tracking how well a company is enhancing customer experience and engagement. Further, digital transformation is not a one-off exercise, but rather an ongoing effort to keep abreast of customer, market and business changes, trends and demands.

So how do you measure customer lifetime value? Many companies find this a challenge, giving an opportunity for resellers to provide support and steer them in the right direction. More than one third of companies responding to a recent survey cited insufficient technology to support measurement initiatives. Avaya and Frost & Sullivan developed a CLV calculator to help companies find answers and better understand what and how to measure. The CLV calculator poses questions around topics including customer support and acquisition costs, length of customer retention, competitive comparisons, business orientation, and organizational and support capabilities tactics. The tool subsequently provides a set of results based on the organization’s input, providing insights into such areas as the impact of potential CLV on expected annual profit growth over a three year period, current and future adoption/maturity of CLV and the impact of potential CLV on net new revenue for the organization.

Can CLV Be Changed?

One of the main influences of CLV that can enable or prevent successful strategies is the orientation of the business. Companies that measure CLV hold a strong belief that the customer experience drives customer lifetime value, compared with those who don’t. To that end, two things in particular separate strategic, high-performing CLV users from the rest of the pack: One is that the experience and brand are given the highest priority; and two, the contact center is the epicenter of ensuring long-term loyalty. High-performing CLV companies use contact-center technologies to offer and join different media; that enables a seamless, integrated omnichannel customer experience across the entire customer journey.

It may go without saying that the complexity of managing multiple channels and extracting the data that can and should inform the customer relationship can be overwhelming. This makes it that much more important that there be a fulcrum from which all levers can be pulled. With a “control tower” for the customer relationship, technology investments can be optimized in pursuit of the seamless, omnichannel experience rather than ending up as dead ends for both the customer and the bottom line.

As companies invest in digital transformation strategies and technologies, customer lifetime value can help monitor progress against one of the primary objectives and spotlight when and where the next steps should be taken. Customer engagement is increased when there is a business orientation that prioritizes the customer experience and brand. These are hallmarks of high-performing CLV companies, which also outperform others in profitability and growth. That’s a holiday gift that keeps on giving all year long.  

Laura Bassett is director of enterprise product marketing at Avaya.


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