Lifetime customer value is defined as the present value of future cash flows through long-term customer relationships.
“In times of stagnant growth, retailers need to develop lifetime customer value through improved customer retention, re-activation, and acquisition strategies,” said Sahir Anand, senior analyst at Aberdeen and chief author of the customer loyalty benchmark report.
Among retailers, 93% say they execute loyalty programs as a standard offering for their web, store or catalog channel customers. Such campaigns may include point perks, rewards, coalition marketing, frequent buyer offers, and private-label credit cards.
However, the tactical nature of these loyalty campaigns targeting short-term retail demand often overshadows lifetime customer value, according to Aberdeen.
“Loyalty campaigns are executed without due consideration to ideal customer segments, tools, coordinated cross-channel marketing needs, and long-term customer relationships,” Anand said
Cost-benefit issues surrounding loyalty programs are top-of-mind for retail marketers, and measurement of ROI on customer loyalty programs is continuous, the study found. Determining such an ROI is a much simpler process than other retail solutions, such as POS, merchandising or pricing, Aberdeen said.
Repeat visit (61%), incremental sales (58%), and overall satisfaction (57%) have emerged as the three most significant factors used by retailers for justifying spend on loyalty elements, operational costs, and upgrade/deployment of loyalty software applications.
As for technology used to enable loyalty programs, the top priorities among best-in-class companies are database marketing, end-to-end loyalty marketing software, loyalty card-processing software and CRM applications, Aberdeen found:
Aberdeen conducted the survey of 231 retail enterprises between May and June 2008 to determine the current state of loyalty technology and process integration in retail.