Why LCV Drives Better ROI Than Conversion Rate: New Study Out Now

By Evan McGonagill

March 22, 2019

Last week, Monetate released our 2019 Personalization Development Study—a deep dive into how brands are using personalization to create more loyal and lasting customer relationships. We partnered with WBR Research for the third year in a row to gather responses from over 600 senior marketers in the retail, travel & hospitality and insurance sectors.

The report distills their responses to explore trends in adoption of, investment in, and success with personalization. It also identifies correlations with factors like return on investment (ROI) and overall business performance, surfacing insights about what works and what doesn’t. We invite you to read the full report—or, keep reading for an introductory peek.

Taking a Long View of Success Metrics

A key insight from the report: Long term metrics drive better value than short term metrics. Let’s break that down.

We asked marketers about their primary business goal for implementing personalization. The most popular answer, at 28.6 percent, was to increase average order value (AOV). We did some more digging into this data, however, to see what the implications of those choices might mean. When we compared organizations’ reported business goals to the ROI that they are getting from personalization, we saw the following trend:

2019 Personalization Development Study

Three of the responses that we offered on the survey—the three on the right—were metrics with a short-term focus, including “increase AOV,” “increase conversion,” and “reduce bounce rate.” These are metrics in which the lift is immediately visible and the payoff is quick. The other two response options, left-most on the chart, have more of a long-term focus: “Increase customer loyalty” and “increase customer lifetime value” are oriented toward cultivating a relationship with a customer in which they develop an affinity for the brand and return again and again. Personalization has been touted in the market as a boon for both goals.

What emerges in the chart above is that businesses who are getting high ROI (3X) are more likely to have reported that they use a long-term metric as their primary business goal for personalization, while businesses getting comparatively low ROI (1X) are disproportionately clustered toward the short-term.

To zoom out momentarily: Personalization technology has come a long way. In the past, the term has been synonymous with A/B testing and product recommendations, both of which are focused on optimizing for short-term lift. It’s no surprise that those goals still have a strong hold on marketers. And they do have value to contribute: They can be important for understanding what works for your audience, as well as for justifying personalization investments to leaders.

However, the industry is evolving: Organizations are beginning to recognize the importance of taking a longer view, one that is more centered on a high-quality customer experience that translates into a strong relationship—rather than just driving toward the transaction. We see the rationale for that approach borne out in this data: The businesses that are getting the best value from personalization are 50 percent more likely to focus on customer loyalty than those getting low ROI, and nearly twice as likely to focus on customer lifetime value. In contrast, low ROI companies are nearly twice as likely to focus on short-term metrics.

The 2019 Personalization Development Study shares insights into the organizational structures, planning strategies, and technology investments that businesses are making today. The analysis breaks down the data by ROI and revenue success so that you can see exactly what methods high achievers are using to attain their goals, and the mistakes that struggling organizations are making as they fall short. Download your free copy today.

Evan McGonagill is a content writer for Monetate, where she researches and produces whitepapers, blog posts, and other material about commerce and personalization. Evan has a background in libraries and archives, and she uses her interest in the structure and flow of information to think about how brands can harness data to build more personal connections with their customers. When she isn't in the library or learning about personalization, you can find her playing music in West Philadelphia.

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