Lifetime Value Online?Written by Kim Wingate
In "Big Time Banner Advertising," we discuss importance of establishing an acceptable level of return for your promotional investments. This number becomes criteria for what is deemed a success and what is deemed a failure. How you determine this number is not only critical to success of your advertising efforts, it's also critical to ongoing success of your business in general.Many dot-coms make mistake of using a "lifetime value of a customer" calculation to determine their success criteria. They estimate how many purchases a customer may make from them over a long period of time. Then they calculate how much profit will be contained in all of these purchases. They will then use this "lifetime value" figure to determine how much they are willing to spend to acquire this customer. This is how some of these dot-coms can rationalize spending nearly $100 in promotional dollars for every unique customer buying $20 worth of books or CDs. Do lifetime value calculations even make sense in an environment where "switching" is so easy? In online business environment, it's very easy for your customers to simply click away to a better deal or a more appealing offer. Online, there are fewer opportunities for true customer lock-in. Sure, our customers have a certain level of familiarity with us that helps gain their loyalty. And, we may also offer our customers rewards or incentives to encourage their loyalty. But when compared to an offline lock-in such as location of your nearest grocery store, these types of online lock-in are clearly far more fragile.
| | Opportunity Knocks QuietlyWritten by Kim Wingate
In business, we often focus most of our attentions on "the big issues." Our next big ad campaign or our new product development project loom large and capture a significant portion of our mindshare. These big issues, because of their size and scope, seem to be our path to exponential success and here is where we focus our efforts.But sometimes, it's little things that have largest positive impacts on our business. These things often seem minor compared to our big issues. They are often difficult to recognize at time, and we might even pass them by as we focus on what we perceive to be more important. How many tremendous opportunities do we pass by because we have "bigger fish to fry?" For example, a free case study offered by AvidSurfer details how one large e-commerce company made relatively minor improvements to a single page of their site. These improvements took only a few hours to execute and didn't cost any money. Their efforts would certainly not be considered to be "big issues" to most folks. Yet, impacts of this small effort were tremendous. This site was able to generate $13,500 in additional sales per day as a result. Had this company only focused on major issues, they may have missed out on nearly $5 million in additional sales per year!
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