How to increase Customer Lifetime Value with the 80/20 rule

In modern marketing, acquiring new customers is increasingly expensive, while retaining existing ones is essential for sustainable growth.

This is where Customer Lifetime Value (CLV) comes into play, a strategic approach that focuses on the long-term value of customers rather than individual transactions.

A recent article from Think with Google explores how to leverage the 80/20 rule to identify and nurture the most profitable customers, using data and new technologies such as AI to optimize marketing strategies.

The 80/20 Rule and the Potential of CLV

Pareto's rule teaches us that 80% of a company's revenue comes from 20% of its customers. This principle highlights the importance of focusing on the right customers—those who ensure long-term returns—rather than indiscriminately acquiring new ones.

owever, only 25% of marketers use CLV as a central metric, despite technological advances that have made its implementation easier

By analyzing proprietary data, it is possible to identify the most profitable customers and optimize acquisition and retention campaigns.

How to Attract the Right Customers

To maximize Customer Lifetime Value (CLV), follow this targeted three-step process:

1. Identify High-Value Customers
   • Analyze your data to determine who your most profitable customers are, what demographic traits they share, and how they behave. This customer profile will serve as the blueprint for identifying new high-value prospects.
2. Create a VIP List
   • Using your proprietary data, build a "VIP list" of high-value customers (Customer Match). This list will help you tailor your marketing campaigns toward the most profitable segment, enhancing both customer acquisition and retention.
3. Optimize Campaigns with AI
   • Tools like Google Ads enable you to set specific goals, such as acquiring high-value customers, using value-based bidding. For example, the Turkish retailer Boyner achieved remarkable results: 340% increase in new customers, 4.1x growth in CLV, and a 20% reduction in customer acquisition costs. By focusing on identifying and acquiring high-potential customers, Boyner successfully optimized its campaigns and enhanced marketing efficiency.

This success stemmed from a strategy that prioritized identifying and acquiring customers with strong long-term value potential.

Cultivate Relationships with Your Best Customers

Acquiring high-value customers is only the first step. True success is built by cultivating these relationships to maximize their lifetime value. Here are some best practices:

• Focus on targeted cross-sell and upsell: Avoid suggesting irrelevant products, as this could reduce customer profitability.
• Prevent churn: Increasing retention by 2% can have the same economic impact as reducing costs by 10%.
• Leverage the right channel: App users, for example, have a CLV up to 5 times higher than web buyers. Tools like Web to App Connect can help you drive customers to more profitable channels.

An example? The platform Vivian Health tripled its conversion rates by using campaigns that encouraged web users to download their app, thus optimizing CLV.

Why CLV is the Future of Marketing

Focusing on lifetime value is not just about maximizing current revenues but also about creating a strong and profitable customer base over time.

With advanced tools, such as AI and optimized campaigns for acquisition and retention, brands can ensure a sustainable return on investment.

To learn more, read the full article on Think with Google.