Brian Dennehy: Customer Lifetime Value

Leading marketers are using advanced analytics to predict and understand customer behavior, to connect effectively and retain high value customers. Brian Dennehy, expert vice president in Bain's Customer Strategy & Marketing practice, outlines how a marketer can turn a hypothesis into action.

Read the Bain Brief: Customer Lifetime Value—A Better Compass to Guide Your Marketing Automation

Read the transcript below.

BRIAN DENNEHY: Today there's a marketing revolution going on. The marketing revolution consists of Big Data, advanced analytics, and the increasing use of tools and technologies. Unfortunately, that's a pretty complex environment to navigate.

Today's leading marketers are taking traditional segmentation and overlaying it with customer lifetime value. This allows them to make more effective trade-off decisions on the customers they target, as well as their investments in technology and tools.

The second thing that smart marketers are doing today is they're learning how to connect with their customers more effectively, especially high-value customers. First, they're using artificial intelligence, and data, and data science, to better understand prepurchase behaviors. They're also using artificial intelligence and machine learning to predict long-term behaviors as it relates to a marketing channel, as well as to the lifetime value of a customer.

There are lots of ways to talk to customers. Traditional marketing relied on four primary channels: television, radio, newsprint, and what we call out-of-home, or billboards and the like. Today, there are literally thousands of ways to connect with a customer: Snapchat, YouTube, any digital platform. Smarter marketers are recognizing this, using [customer lifetime value] to inform which channels they want to reach customers through, and then informing which customers they want to reach and how.

The third thing that smart marketers are doing today is rather than making a big bet, based primarily on one person's judgment, usually the CMO or a creative director, they're using data-informed hypotheses to figure out which customers to reach, and which levers to pull to reach them. Instead of doing a huge campaign, costing millions of dollars and fraught with risk, today's marketers are making small bets, reaching small groups of customers, assessing whether it works, and then moving forward. A hypothesis into action is the new best step for a marketer.

Read the Bain Brief: Customer Lifetime Value—A Better Compass to Guide Your Marketing Automation