Predictive Marketing

Chapter 4Managing Your Customers as a Portfolio to Improve Your Valuation

The best way for any business to maximize enterprise or shareholder value is to maximize the customer lifetime value, or profitability, for each and every customer. Customers are the most important assets for a firm and therefore customer lifetime value is the most important metric in marketing. If you maximize the lifetime value, or profitability, of each and every customer, you also maximize the profitability and valuation of your company as a whole.

The best way to optimize lifetime value for any customer is to give that customer the best possible experience throughout the life cycle of their interaction with your brand: from their first exposure to your brand to becoming paying customers, coming back a second time, and eventually turning into loyal brand advocates for your business. Predictive marketing explains how you can optimize the lifetime value for every prospect and customer. Now that marketers have more detailed information on past, current, and future needs of customers at their fingertips, delighting each customer one at a time is finally possible.

The best way to optimize lifetime value for all customers is to adopt a portfolio approach. Marketers need to recognize that different groups of customers have different value and different behaviors and take different actions based on these distinct customer segments. We cover types of clustering in another chapter, but changing the mentality ...