Lifetime Value of a Customer in the Era of Longevity.
I learned this concept in business school and can still recite the definition: “the present value of the future cash flows attributed to the customer during his/her entire relationship with the company.” While I appreciate the premise as it suggests a long-term, less transactional approach to our customer relationships, it also has fueled Madison Avenue’s fixation on marketing to young people because they have more years ahead of them.
But, I have two questions for the advertising industry:
You advertise to young people because they have more remaining years ahead of them than me, but: (a) have you factored in the declining disposable income of young adults and (b) do they exhibit the same kind of loyalty that older customers demonstrate?
Is your lifetime value of the customer premised on U.S. longevity based upon the MadMan era which was less than 70 years old in 1960 and is nearly 15% higher today?
We’re living longer, healthier and active longer, and we tend to be more loyal to brands as we age. It’s time we revisited this age-old marketing principle and updated it with new data associated with longevity and loyalty.