Non-Line Blogging

My last blog post in collaboration with Avinash Kaushik included a wonderful free souvenir.  It was an Excel workbook that we created to help with all the tricky sums you'll need to crunch when you begin a life time value analysis of your business.  The blog has generated lots of queries about the topic that we thought we would remind people there's a tool to help!

So, feel free to download the "Life Time Value Workbook" and use it to kick-start your LTV journey.  One Worksheet helps you understand just how different your "best" and "average" customers may be.  Simply plug in a few facts about order values, number of sales a year and how long they have been customers for and BINGO the spreadsheet shows you how much profit you make from different customer types.

The second worksheet takes you though a much more complicated LTV model for a specific customer segment.  It lets you make projections up to 5 years ahead and builds in the "Net Present Value" calculations so that you can impress your Bean Counters that you recognise there is a risk involved in spending money on marketing.

One final thought.  You'll need to do some rummaging around in buckets of data to get some of the customer information - don't expect it all to be waiting for you in your web analytics tool.  For example, you may not have "repeat orders" consolidated for individual customers - you'll have to run a few reports to get a basic "single customer view" and then tot up their total spend and total orders for a given period.  

Once you have that data, you can rank and segment the customers into best, average and worst.  Or, by adding a source code, you could split your file down between "email list rental" versus "affiliate" customers, or people recruited by "price offers" versus "partner offers".  You should be able to see patterns emegring that will have a profound impact on your future acquisition and retention activity.

Our blog and the comments will give you much more food for thought.

Enjoy! 

I have been meaning to write a piece about life time value for many months.  It's the most important metric for marketers focussed on optimising long term value for their organisations, yet in the digital world we have not really embraced it.  This is partly because the industry is not old enough to need to worry about customer segment performance in 3 or 4 years time, so we could put it down to a "capability-maturity" thing.

However, as we drag ourselves out of recession now may be a great time to consider whether you are recruiting the "right" customers and using the "right" metric. By happy co-incidence I was invited by the wonderful Avinash Kaushik to work with him on a piece on life time value and the results of our endeavours can be found here on www.kaushik.net.

Happy reading!