Tell me, how much is your customers life really worth?
Chuck Bankoff - Monday, June 04, 2012
I am not talking about an intervention or professional hit here… I am thinking more outside of the box. As in finding a more appropriate way to gage your company’s online marketing return on investment (ROI).
A big oversight many marketers make is overlooking the amount of revenue a specific customer brings in over the span of your relationship with them. It is vital to track this kind of information since it denotes how valuable new customers are and the worth of attracting them. It also will bring to your attention how well your customer retention program is doing and the amount you should invest in it.
The average lifetime value of each customer can be measured by noting one simple thing. This includes the total value of sales and total number of customers. As soon as you calculate the estimated profit from every new customer, you can make a more precise assessment on how to distribute your online marketing budget. You can always afford a higher acquisition cost when knowing that the lifetime value of a new client is high.
Chris, who owns Oregon Mushrooms, discovered how this concept worked immediately. She explained that she didn’t mind if she lost a bit of money for each new client because her customers always reorder ever few months or so. She offers a unique product with great customer service.
After running her Search Engine Optimization and Pay-Per-Click programs for a number of years, her cost per acquisition has decreased. We have fine-tuned her SEO and PPC programs and the results have been extremely beneficial.
Interventions should really be reserved for those businesses that don’t understand the importance of measuring the lifetime value of new customers. Chris never did end up loosing any money for her Internet Marketing campaigns.