Using CLTV to Increase Your Insurance Marketing Results

I’m continuing to read “Data-Driven Marketing” and it’s really has me thinking about how independent insurance agencies market (IIAs).

The author takes some time to define CTLV (customer lifetime value). Read about CLTV here. Jeferry’s book about marketing, so the he is attempting to illustrate what the most successful companies are doing. His main point is that data is critical to getting the most out of your marketing efforts.

So where does CLTV fit in? Well we all know that “all customers are not created equal”. Some customers are extremely profitable while others may even be negatively profitable. Typically, insurance agencies will market using a “one size fits all” approach. If you can determine the profitability of each customer, you can begin to segment them into high, medium and low. Low value customers are either negatively profitable or just slightly profitable. It makes no sense to market to these folks. Medium value customers have the potential of moving from medium to high (i.e. cross selling campaigns). High value customers are the ones you want to spend the most on and make sure you keep them.

In order to put this approach in practice, you need to know your revenue and costs/ per customer. This is difficult to do, but is worth the effort. If you don’t have the accounting expertise, hire someone who does. There are “roving” CFOs available that can make sure you have the right infrastructure to perform these calculations. It may cost you a little bit, but the value and insight into your business is invaluable.

Once you’ve calculated the CLTV of each customer, rank them, highest to lowest. This can easily be done using Excel (or other programs – see example here). Now any marketing campaigns you perform can be delivered to a much smaller set of customers, lowering your costs and increasing your results.

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2 Responses to “Using CLTV to Increase Your Insurance Marketing Results”

  1. Anup says:

    Hi John,

    Wondering if you could share your thoughts on what approach should be taken for a group insurance customer. Should we look at the customer as a whole or should the individual employees within the group be the target for doing CLTV based analysis

    • John Boudreau says:

      Anup,

      Thanks for visiting my blog. Could you give me some more detail regarding what you mean by “a group insurance customer”? Do you mean group benefits?

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