Why Firms Don’t Care About LTV

Jim Novo asks (and answers) the question:

Why don’t firms care about customer lifetime value?

Jim asserts that there are fundamental reasons why companies don’t take a longer-term view in respect to their marketing programs including:

  • Business culture — where performance rewards are tied to short-term goals.
  • Nobody in charge — no one has full-time responsibility for customer productivity or retention.
  • Lack of desperation — firms just not feeling the pain (yet).

My take: I agree with Jim 100% — but I think the fundamental reasons go further. The even more fundamental reason is religion. Thesaurus.com defines religion as “a specific fundamental set of beliefs and practices generally agreed upon by a number of persons.”

For my money, the reason that LTV hasn’t taken hold in many firms is that the marketers in charge have a fundamentally different set of beliefs. This is the essence of marketing civil’s war — the branding religion is currently the predominant religion.

The missionaries may very well be right — LTV may be the one right way, and a superior way of (marketing) life. But for now, they’re preaching to the choir, and trying to convert the heathen.

Look at the state of “customer engagement.” A year ago the ARF defined engagement as “turning on a prospect to a brand idea enhanced by the surrounding context.” There are far more articles about how engagement is about how much time someone spends interacting with an ad than how engagement could be about engaging with the product or service itself.

In my presentation today at Epsilon’s customer symposium, as I was discussing customer engagement (a series of interactions that strengthen a customer’s emotional connection to a firm), you’d think that many direct marketers had never even heard the term before.

Culture, responsibilities, and economic conditions all definitely play a role. But below that surface are religious differences in marketing theory.

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