Nineteenth century Philadelphia retailer John Wanamaker supposedly said “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” Twenty-first century Philadelphia Wharton marketing professor Peter Fader has found a way beyond mass marketing to targeted marketing to understanding Customer Lifetime Value (CLV). His main conclusion is that a very small proportion of your current and potential customers account for a very large proportion of your profitability. So, relentlessly focus your marketing resources on those individuals.

But focus those resources differently.

As Orwell put it, “All animals are equal, but some animals are more equal than others.” Zodiac CEO Artem Mariychin applies that thinking to businesses this way, “The fundamental question for a lot of companies … is what is an individual customer worth?” This should drive everything you do to influence different prospects and customers.

Fader, who founded Zodiac, put it this way:

And it’s not only coming up with a single number, it’s breaking it down into how long will this customer maintain the relationship with us? How many more transactions will they have? What will be the size of those transactions? So it takes in a number of different predictive elements that, when you combine them all together, gives you CLV [Customer Lifetime Value].

Fader is one of the speakers at the next week’s CEO Connection Mid-Market CEO Convention. He’ll be talking about customer-centricity and ways to treat different customers differently. He has found that “patterns of the human behavior really are quite robust”. So expect your high, medium and low value customers to continue their habits and patterns. This implies you should:

• Embrace your high value customers

• Push medium value customers into the high value category

• Treat your lowest value customers with the respect they deserve (not much).

How you do this depends on whether your customers’ overall relationship with you is utilitarian, emotional or fanatical and yields the following:


High Value Fanaticals think it is their brand. Honor them by seeking their input and advice. Delight them with things that heighten their attachment as your most loyal fans.

High Value Emotionals buy into your complete brand: why you do what you do, what you do, how you do it and who you are. Invest in your emotional brand story with them.

High Value Utilitarians care about value equations. Yours works for them. So feed that value by communicating the features and benefits they value in what you say and what you do.

Medium Value Fanatical are on the edge. They could be high value fans if you invite them in. This is not about trial. This is about making them feel like they belong.

Medium Value Emotionals understand your story. They may even believe it. They just haven’t connected with it completely – yet. Drive that connection by showing how your brand fills their emotional gaps or voids.

Medium Value Utilitarians generally switch between your products and services and comparables. Win them over with a fundamental change in your relative value equation by increasing benefits or decreasing costs like price, convenience or total cost of use.

Low Value Fanaticals are probably someone else’s high value fanaticals. Don’t waste your time or energy here.

Low Value Emotionals haven’t connected with your story and aren’t likely to do so. Your low level brand communication will pull in some of the undecideds and perhaps some of these low value emotionals.

Low Value Utilitarians are looking at short-term value equations on a transaction by transaction basis. The lifetime portion of the Customer Lifetime Value calculation for these people is one transaction.


Implications For You

1. Stop treating all your customers (and prospects) the same. Understand differences in Customer Lifetime Value and invest your time and resources accordingly.

2. This will require an investment in getting and analyzing individual customer data. (If you don’t, your competitors will.)

3. And will require you to stop or cut most of your currently popular but wasted programs.