Lifetime,Value,Online,amp,#63, marketing Lifetime Value Online?
Automation technologies represent a fundamental aspect of any modern industry. The major types of industrial automation solutions, such as DCS, PLC, SCADA, and MES, are used on a large-scale in process and discrete industries.DCS technologie Awhile ago, I got an email from one of the "gurus" I follow and it shocked me. The gist of it was this person wanted to trade services for a household item.To say it floored me would be an understatement.What was worse was a few days later t
In "Big Time Banner Advertising," we discuss the importanceof establishing an acceptable level of return for yourpromotional investments. This number becomes the criteriafor what is deemed a success and what is deemed a failure.How you determine this number is not only critical to thesuccess of your advertising efforts, it's also critical tothe ongoing success of your business in general.Many dot-coms make the mistake of using a "lifetime value ofa customer" calculation to determine their success criteria.They estimate how many purchases a customer may make fromthem over a long period of time. Then they calculate howmuch profit will be contained in all of these purchases.They will then use this "lifetime value" figure to determinehow much they are willing to spend to acquire this customer.This is how some of these dot-coms can rationalize spendingnearly $100 in promotional dollars for every unique customerbuying $20 worth of books or CDs.Do lifetime value calculations even make sense in anenvironment where "switching" is so easy? In the onlinebusiness environment, it's very easy for your customers tosimply click away to a better deal or a more appealingoffer. Online, there are fewer opportunities for truecustomer lock-in. Sure, our customers have a certain levelof familiarity with us that helps gain their loyalty. And,we may also offer our customers rewards or incentives toencourage their loyalty. But when compared to an offlinelock-in such as the location of your nearest grocery store,these types of online lock-in are clearly far more fragile.Many online businesses find themselves in serious troublewhen they acquire customers based on a lifetime valuecalculation that simply never materializes as theircustomers click away to the latest deal of the day.In "Big Time Banner Advertising," it is recommended that acost-per-order target be used instead of lifetime value. Acost-per-order or CPO target simply allows you to treat eachorder as a one-time event. By setting a CPO target, there isno guesswork as to what a customer may be worth to you inthe future - you know exactly what customers are worth on aper-order basis.For example, based on your product margins and average ordersize, you may determine that $5 is the most you can pay foreach order while still meeting your business objectives.This number becomes the CPO target for your marketingefforts. Marketing efforts that achieve this target CPO orbetter are "keepers" while those that don't get killed. Abanner ad that costs $1000 and drives 250 orders is akeeper. A newsletter ad that costs $100 and drives 5 ordersdoesn't get renewed.By using CPO targets, you are relying less on "what may be"and relying more on "what is" to make your marketing andadvertising efforts more efficient, effective, andprofitable. Article Tags: Lifetime Value
Lifetime,Value,Online,amp,#63,