Customer Value Management (CVM): How Technology is Transforming Loyalty

One of the key trends in modern marketing is the focus on omnichannel strategies and personalization. To enhance loyalty and retain customers, businesses are increasingly prioritizing their needs, offering targeted solutions. Communication is becoming more structured, with a growing reliance on data analytics.

Strategies aimed solely at constantly acquiring new customers are being replaced by CVM marketing—an approach focused on increasing the value of each individual customer. This strategy often proves more profitable than managing a customer database without detailed segmentation and personalization.

In this article, we will explore what customer value management is, how this strategy is implemented in the digital era, and why effective CVM requires the use of management systems.

CVM: what it is and how it is applied in marketing

CVM is a marketing concept focused on increasing the long-term value of each customer. It involves segmenting the customer base according to their value to the business. Communication is structured to enhance the value of each segment and improve customer relationships.

The CVM (Customer Value Management) approach has been known since the second half of the 20th century but has gained popularity only recently. In the digital era, new communication channels have emerged, and the volume of customer data has increased. Marketing campaign costs across various channels have risen, and in this context, CVM marketing helps businesses find effective and cost-efficient ways to engage their audience.

Advantages of CVM for modern marketing:

A way to stand out among competitors. CVM is a comprehensive approach that involves targeted customer engagement and a detailed study of their needs. Predictive data analytics is also applied to anticipate how the preferences of the target audience will evolve in the future. This approach strengthens the business’s position against competitors and provides additional advantages in the fight for customers.

Budget optimization. Not all communication channels or marketing efforts yield results, and it is often challenging to identify ineffective sources, especially in attribution models that consider only the last touchpoint (last click) before conversion. Customer value management involves detailed audience segmentation and an analysis of actions and channels that do not deliver results or are less effective. This helps avoid unnecessary marketing budget expenses.

Increased customer loyalty. Customer value management focuses on addressing the customer’s needs both in the product and in interaction methods. Loyalty technologies based on CVM adapt to each customer, improving their relationship with the company and motivating them to return.

Revenue growth. A targeted approach, personalization, and reduced marketing expenses contribute to increased profits.

Metrics for CVM

To enhance customer value, it is essential to track metrics that reflect loyalty levels and generated revenue. Therefore, the following metrics are used in CVM marketing:

Customer Lifetime Value (CLV): This metric calculates the total revenue generated by a customer over their lifetime interaction with the company. It helps determine how valuable a customer is to the business and whether the marketing communication expenses are justified.

Retention Rate (RR): This metric indicates the percentage of users who return to the product or make repeat purchases within a specific time frame. It reflects how effective the customer retention system is.

Average Revenue Per User (ARPU): This metric shows the average revenue generated by a single user during a given period. It is used to forecast future profits and evaluate the effectiveness of sales-influencing channels.

Churn Rate: This is the percentage of customers who have stopped interacting with the company. It helps identify underperforming communication channels and unsuccessful campaigns.

Net Promoter Score (NPS): This is a consumer loyalty index that indicates how satisfied customers are with the company's service and products, as well as their willingness to recommend the brand to others.

How technology is changing the approach to CVM

The first step toward the evolution of CVM was the introduction of CRM systems in the late 1980s and early 1990s. At that time, companies began consolidating customer data into a single system. With the advancement of technology in the 2000s, it became possible to track the entire customer journey and even predict their actions. Businesses came to understand that retaining existing customers is often more cost-effective than acquiring new ones. As a result, today’s forward-thinking companies focus on enhancing loyalty and deepening personalization.

Technological advancements are transforming the CVM approach. The volume of customer data, expectations for service quality, and the speed of interactions are all increasing. As a result, marketing is evolving alongside new IT tools.

Technologies used in CVM

Big Data and data analytics enable deeper insights into customer behavior trends and preferences, playing a key role in creating precise offers and successful marketing strategies. Predictive analytics, in turn, provides the ability to adapt the business to future customer needs.

Artificial intelligence and machine learning process vast amounts of data, a task that even an entire team of marketers could not accomplish. These technologies allow businesses to respond quickly to customer actions and automatically tailor offers to their needs. For example, algorithms generate advertising messages customized for individual users based on their behavior and preferences.

Marketing automation simplifies repetitive and routine processes, speeds up communication, and improves customer segmentation—one of the core principles of CVM. Machines handle these processes faster and more accurately than humans. Moreover, automation reduces the likelihood of errors that could impact customer loyalty.

Personalized campaigns boost customer engagement and increase conversion rates compared to mass messaging. Their implementation relies on demographic and behavioral data, which digital tools can automatically collect.

Example of a personalized email from Sephora

Trigger campaigns help retain users and guide them through the customer journey. Automated messages triggered by customer actions serve as timely reminders (e.g., about an abandoned cart) or provide updates (e.g., about order status). This approach increases conversion rates and strengthens customer loyalty.

Chatbots speed up customer communication by being available 24/7 and resolving issues without operator assistance. AI-powered versions can fully interact with users, contributing to increased loyalty and retention.

Example of a chatbot in the Domino's Pizza app

How to implement CVM in your marketing

The CVM approach is not feasible for all businesses, as its implementation requires a customer base of at least ten thousand users. A company must leverage various marketing channels (not necessarily all), such as push notifications, email campaigns, SMS, and messengers.

CVM also demands resources: a team of marketers, analysts, data experts, and IT tools, which are essential for collecting and processing large volumes of data.

What is needed to implement CVM

1. Set a goal. Define the key metrics and outcomes your company aims to achieve with CVM.

2. Collect customer data and segment it. Analyze the value of customers to the business by calculating the key metrics used in CVM.

3. Develop a plan to increase customer value through available channels and tools. Use personalization, campaigns, and other forms of interaction.

4. Execute campaigns. Utilize marketing management software, such as CRM, CDP, email campaign services, and more.

5. Analyze results to adjust the strategy or improve future campaigns.

CRM or CDP for implementing CVM

While the CVM approach traditionally relied on CRM systems, more functional alternatives have emerged today in response to market demands. It is crucial for a marketing system to collect and process information, as customer value management is data-driven.

Let’s compare two popular tools for CVM:

In the context of CVM, the choice between using CRM and CDP depends on the scale of the business and its specific needs. Additionally, these systems can be integrated, providing the opportunity to gain a more comprehensive view of customer data.

Advantages of using Altcraft CDP for implementing a CVM strategy

The platform not only handles the collection, processing, and storage of data from various sources but also includes tools for customer communication. Information is consolidated into a unified profile, which serves as the basis for creating personalized offers.

It also supports the principle of micro-segmentation, which is essential for managing customer value. Customer groups can be divided based on demographic characteristics, geodata, actions across different channels, purchase categories, and other parameters.

Example of audience segmentation by geolocation in Altcraft Platform

Omnichannel marketing is implemented on the platform, allowing messages to be sent via email, SMS, Push, and messengers from a single interface. Real-time analytics provide instant access to data.

Channels for sending messages in Altcraft Platform

Automation of mailings and personalization increase customer engagement and drive sales growth. On average, online sales increase by 30%, and repeat purchases rise by 49%.

Altcraft Platform is a universal solution for simple and centralized management of customer value.

Summary

CVM is a marketing strategy focused on increasing the value of each customer throughout the entire interaction period. This approach optimizes marketing budgets, saves resources, enhances user loyalty, and boosts company revenue.

Modern technologies such as Big Data, AI, machine learning, marketing automation systems, trigger mailings, and chatbots are used to manage customer value. These IT tools help process large volumes of data, personalize offers, and speed up communication.

The CVM approach requires management systems that enable the collection and processing of customer data. In this process, CRM and CDP systems play a key role and can be used either independently or in integration.