Not all customers are created equal. To drive growth, brands must attract and retain high-value customers. Google’s Director of Performance Marketing, Matt Lawson, talks with John Grudnowski, CEO of digital agency FRWD, about helping brands uncover value by focusing on their best customers.
Marketers are struggling with channel- and product-first mindsets that don't allow them to put customers at the heart of their strategy. But some marketers are beginning to break through. Focusing on Customer Lifetime Value (CLV) is the first step. To do that, brands need to break down organizational barriers, evolve their data and measurement strategies, and embrace a test-and-learn approach.
Matt Lawson, Google: Data is a huge piece of a customer-centric strategy. Can you start with some of the challenges organizations face in integrating data?
John Grudnowski, FRWD: For many reasons, integrating data into your strategy can be tricky because it requires access across multiple teams. This has always been an aspect of marketing teams that fascinates me. The C-Suite want and need their teams to optimize for business outcomes but the teams and technology aren’t aligned to accomplish this. Too often then, the result is budgets aligned independently by channel to specific engagement goals, which means teams are forced to optimize for channel ROI goals—search or social for instance—versus overall business goals. It’s never quite made sense to me.
We’ve helped brands unlock tremendous value just by breaking down silos across marketing, finance, IT, and agency partners, to give all teams greater transparency and access to comprehensive data.
How do you see brands evolving their first-party data approach to better understand customers?
First-party data is a marketers best friend. However, marketers often only look to their first-party data to help inform the best moments to reach customers and the best messages to reach them with. Utilizing data in this way makes sense, but the best marketers deploy a two-fold data strategy. They use their first-party data, and they leverage that data to create tiered customer segmentation based on the value of each customer. Those segments are then activated differently with media and creative.
How have you seen brands successfully incorporate third-party data into the picture?
Adding third-party data into the mix is vital to scale into new audiences. Third-party data is easily actionable, but it’s often less accurate for modeling than first-party data. It also requires testing to locate the right data sets. Leading marketers are getting better at using third-party data both as a scaleable way to reach and engage net new customers, as well as an opportunity to gauge effectiveness of creative and audience-specific offers.
Customer lifetime value has always been a part of marketers’ thinking, but the emphasis on this measurement is evolving. How are marketers addressing lifetime value now?
We see marketers have the most success when they start with the mindset that measurement will never be perfect—there isn’t a magic wand. Brands must shift their focus from individual channel per-click or per-acquisition metrics to overall business KPIs. Only then will they be able to understand real-time performance in the macro terms of business results, as well as adjust those strategies in the moment for maximum impact. Yes, this is challenging, but the marketers succeeding are those who convince the C-level to move away from set budgets based on ROI metrics to flexible budgets based on business goals.
Can you give an example of a brand that has successfully done this?
The Carlson School at the University of Minnesota is a great example. They wanted to maximize their budget across 10 unique product offerings, as well as justify the combined investment of reaching new students and personalizing messaging. I know this sounds like a lofty task, but focusing on CLV gave them a very actionable plan.
They set a value for each student, by program, and created goals for every stage of the decision cycle. They also factored in the value of the alumni relationship. With a single and consistent focus on driving profitability by maximizing CLV, they gained flexibility with their budget across the entire purchase journey. At the end of the first year, The Carlson School had a 28% increase in enrollment—with no increase in marketing budget. In year two, they doubled their investment in this strategy and surpassed their yearly goal in just five months.
Any other tips for marketers?
Yes, embrace a test-and-learn culture that goes beyond just channel testing. Involve the C-level and agency partners to agree on experiments that break the model and test hypotheses. This includes understanding you might (in fact, you likely will) need to fail first before scaling. Also, one tactic may not work for every audience, location, or product, but if you’re learning as you go, you can respond quickly and make changes.