Pivoting to a longer-term measure of success

Targeting to optimize for LTV of customers is a proven strategy, but what does it take to put it into action? Here's how marketing teams can start to transition toward this more relevant and effective type of measurement in an organization.

Learn LTV terms: The best way to understand marketing strategies that target LTV is to consider the examples of organizations that are already doing it effectively. Leading insurance marketers like Progressive and Allstate currently use better upfront customer data to calculate the lifetime value of a customer against the total cost of their acquisition. This is called the "LTV-to-CAC ratio," which stands for Lifetime Value and Customer Acquisition Costs. This ratio can help marketers understand whether spending money on a campaign makes sense by estimating how much a customer will eventually cost in estimated claims over their lifetime. And it's the kind of language marketers should be speaking to keep pace with the C-suite and actuarial departments, who are increasingly using longer-term metrics like LTV in decision-making.
Partner with the right teams: To get ahead, insurance marketers should partner and collaborate with their actuarial counterparts who already understand the benefit of low- versus high-risk customers, and what that means for the business long term. Additionally, data science teams understand LTV and how it relates to risk, and can validate whether the tactics used by marketing teams actually drive profit.
Target smarter, target safer: One strategy to increase the LTV of customers is to only target the safest drivers in marketing campaigns. The safest drivers have the fewest accidents, and ultimately cost insurance companies the least. But exclusively delivering campaigns to drivers with pristine records is easier said than done. Thankfully, data about how people drive is available via third-party data partners, and this data can help assess a driver's level of risk before they even become a customer. This data goes beyond traditional "driver scores," and gives marketers more opportunities than ever to target the safest drivers on the road based on how they actually drive.
Change doesn't happen overnight. Using LTV as a key performance indicator (KPI) is complex and can take time to prove out. However, one thing that can't be disputed is that certain driving behaviors result in better LTV. Once these drivers are the target of campaigns, it's imperative to communicate upward about change. It's unlikely the CFO will be upset when they hear marketers are considering the long-term ramifications of new customers on the company's bottom line. But achieving buy-in and setting clear expectations around these new KPIs to management and executives is critical. The eventual result of a shift to LTV metrics is worth the wait.

Is it possible to endure another period of economic uncertainty using the same old KPIs? Take a lesson from savvy insurance marketers and use this period of change to realign. Start targeting safer drivers, prepping executives and re-aligning how success is measured. During the next downturn, marketers who follow this advice will find themselves in a more confident and comfortable position.

Special Reports /

Tighter marketing budget? Time to re-evaluate auto insurance KPIs

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