Play Four: Predict Customer Value and Value‐Based Marketing

This chapter looks at strategies to segment and target customers by their lifetime values, a practice called value‐based marketing. The concept behind value‐based marketing is to understand the mix of customer value over time. The chapter summarizes the three key strategies depending on customer value. For high‐value customers, spend money to appreciate and retain these customers. Pay close attention to retention metrics here. For medium‐value customers, upsell to migrate these customers to maximize their potential. For low‐value customers, reduce your costs of servicing unprofitable customers. Marketers should use their retention budgets in order to proactively retain high‐value customers. The main strategy for medium‐value customers is to nudge them into the high‐value customer bucket. It is best to try to reduce the costs to service low‐value customers, rather than firing these customers outright and leaving the door open for competitors to gain strength.