The Marketing Metric That Drives Your Business
Topics: lifetime value, traffic, conversion, sales, lead generation, free traffic, internet marketing
How much your leads are worth? How long do your customers remain customers? Do they buy from you once, then move on? Or do they typically buy two times, three times, four times? More? When you make one sale, how many more sales can you expect that customer to buy? How long do they stay with you after that first sale? What is the lifetime value of your customers?
If you don’t know the answers to these questions, your business could be in trouble. Driving traffic to your site is an important part of your online business, but having lots of visitors does not necessarily equal lots of sales. It’s knowing how to convert those visitors into customers that adds money to your bank account.
To stay in business and predict future success, you must know the lifetime value of your customers. Knowing this figure allows you to know exactly how much you can afford to spend to get new leads and still turn a profit.
The lifetime value of a customer is measured by the value a customer brings to your business throughout that customer’s entire relationship with you. It’s the monetary value your customers bring to your business over a period of time.
In other words, you need to know how long your customers stay with you after that first sale. To better understand lifetime value metric, you need to understand the five essential elements involved in calculating this metric:
–Lifetime/LifeCycle: (This is not to be mistaken for the length of time your customer lives in terms of years on this earth.) This describes the length of time the customer stays with you from the first sale to the last purchase. The longer the lifetime, the more valuable that customer becomes. Because that means he’s buying from you on a continual basis for a certain amount of time.
–Value: This is the dollar amount your customer is worth and figures all the orders this customer makes throughout his lifetime with your business. By totaling the dollar amount this customer spent and then subtracting production costs, retention costs and acquisition costs, you get the net profit. The net profit equals the value your customer brings to your business in monetary terms.
–Recency: This refers to how recent a customer your customer actually is. How long ago did the customer make a purchase? If it was yesterday, that customer is recent. If it was last year, that customer may not really be a customer anymore.
–Latency: This is the average time period between purchases. Through tracking customer behavior, you can determine the average time that lapses between product purchases.
–Friction: This disrupts the latency period. When customers are dissatisfied for some reason, they leave or don’t buy when they are expected to buy. So as the friction increases, the lifetime value decreases. But as the friction decreases (fewer things lead to customer dissatisfaction), value increases. Not as much is disrupting the next purchase, so they purchase more. When the latency period lapses between expected purchases, though, you know friction exists.
You can figure the average lifetime value of all your customers, but to truly benefit from this metric, you need to track the lifetime value of different groups of customers. What is the value of the group from your PPC ads? Newsletter ads? Search engine traffic? Blog traffic?
Some of your traffic-generating methods may be bringing a lot of visitors to your site, but those visitors may not be converting into customers. Also, paid sources of traffic may not bring you as many visitors but have a higher conversion rate.
And some customers may not cost you anything to acquire, but they may not stay with you very long either. Those that may cost you more to acquire could possibly stay with you longer, make more purchases and become your most loyal and responsive customers. Or vice versa.
That’s why it’s important to track the customers you generate from your different advertising campaigns. When you know which sources of traffic bring you the customers with the greatest lifetime value, you can focus your attention on generating traffic through those sources.
You are then able to attract better customers who are more responsive to your advertisements and accurately budget more effective marketing campaigns. Even if you are just getting started, you can benefit from estimating this number and getting in the habit of tracking it. By doing so, you are in a much better position to succeed in business.
Glen Hopkins specializes in teaching struggling entrepreneurs how to turn their small Online businesses into thriving money machines all while working less and earning more. To get more information including Free Reports, Videos and CDs visit: www.GlenHopkins.name
Previous Articles Highlighter:
Ten Reasons Why You Must Track Lifetime Value (1)
Topics: lifetime value, traffic, conversion, sales, lead generation, free traffic, internet marketing Attracting new customers costs more than retaining customers or bringing a past customer back into your lifecycle. So once you have your customers, you can't afford to let them leave without doing everything in your power to increase their lifetime with you.
Creating A Legitimate Internet Marketing Company (2)
Most struggle to make even a few hundred dollars per month. In order to beat the crowd and establish a truly legit internet marketing company, you will need to learn some key concepts that can take you to that level.
Copywriting Conversion Secrets (3)
Glen Hopkins specializes in teaching struggling entrepreneurs how to turn their small Online businesses into thriving money machines all while working less and earning more. To get more information including Free Reports, Videos and CDs visit: www.GlenHopkins.name
Get Rich Quick...A New Year's Resolution! (4)
It doesn't work that way with me! I still have a hard time turning on the computer; much less know how to optimize search engines! My first efforts were with Ebay and I was thrilled when I made my first three dollars profit after selling something I had bought at a yard sale.
How Much Are Your Customers Worth? (5)
Add all those days together and divide by 50 (or the total number of the sample you are working with). This gives you an accurate guess as to how long your average customer lifetime is for all your customers.
How To Generate Sales With Squeeze Pages (6)
You want customers who are going to be with you for a while and people whom you can groom into hyper-responsive customers. If a visitor isn't even willing to stick with you long enough to provide you with her name and email address, do you think she'll want to stay with your business for years to come?
Do You Participate In Banner Exchanges? (7)
The affiliates are typically compensated either on a cost per click basis or a cost per sale basis. Cost per click means the affiliate receives a predetermined amount of money each time a user clicks on the ad.
Secure Webconferencing In Corporate Communications (8)
All of these costs find their way into employees' expense reporting sheets. Many cost wise companies have found that secure webconferencing systems are a viable alternative to run a business without supporting the airlines and the hotel companies.
Blog Marketing To Make Money (9)
Not everyone does it to make money. You might have a blog to record your thoughts and feelings and this is probably not going to be a money-making blog.
The Three Essentials Of Search Engine Optimization SEO (10)
Content is king and will be for a long time. Write as many unique and quality articles as possible and place them on your website. If you want to, you can outsource this process or just visit the article directories and find content related to your niche and use it on your website.
Article Spinning Could Put Genuine Authors Out Of Business (11)
A few years ago, modifying or republishing a Private License Article (PLA) was thought to be a quick and easy way to generate content. Most authors soon found it took as long, if not longer to modify a PLA article than write an unique article from scratch.
Sold On Internet Auctions! (12)
I say almost, because there are exceptions to every rule. Of course there are other on line auction houses on the internet for you to use. There's Yahoo Auctions, ubid, auctionweiser and bidz; just to name a few.
The Quickest And Easiest Way To Make Money Online (13)
With your own website you can promote your affiliate products, allow others to advertise and for a fee, have eBay listings on your site for extra income and also display Amazon's books and products.
Internet Marketing Tips On Getting Your Web Site Spidered Quickly (14)
Keywords: internet marketing The world of internet marketing is a highly competitive place. As a beginning internet marketer there are some basic things you should know about how search engines spider and index your web site.
Simple Steps To Taking Paid Surveys Online (15)
If you spent a couple of million dollars developing a new product you'd want to make sure people like it and you'd also want to know all things that people don't like about it.
How To Deal With Bounced Email (16)
The server might have timed out because it was currently dealing with too many messages, or the recipient's mailbox might have been full, or the email message might have been too large.
Components Of A Marketing Strategy (17)
When working on your business focusing in on these key points will serve you will to take your business results to the next level. Stephen C Campbell MBA, MSc is a Business Consultant and Internet Marketer.
Basic Principles Of Writing An Article (18)
Jot down a few different titles, and eventually, you'll find that one that will grow on you. Titles help you to focus your writing on your topic; they guide you in anticipating and answering your reader's queries.
Just What The Heck Are Promotional Products? (19)
The collection of certain types of promotional items has also become a popular hobby. Promotional Products: a large industry Sales of promotional products in 2006 were $18.8 billion dollars according to the Promotional Products Association International, a 4.25% increase over the previous years.
Light Your Online Home Business Fire By The Daily Blogging (20)
The daily blogging is a strong sign, that you as an online home business owner care about your readers and work hard following the market day and night. It is a strong brand builder, a sign of your commitment.
Newer Articles Highlighter:
Website Marketing Strategies: 5 Tips To Motivate Visitors To Stop Browsing And Start Buying (1)
After all, everybody wants to hang out with vibrant, successful people. Nobody wants to spend time with lazy losers. So how do you create website marketing strategies that motivate visitors to stop kicking tires and start entering their credit card numbers?
Easy To Implement Copywriting Secrets (2)
Good copywriting generates sales; great copywriting creates wealth. Copywriting is simply salesmanship on paper. In a nutshell, copywriting is all about persuasion and motivating people to take action.
Top 10 Tips For Designing Your Holiday Email Campaign (3)
Time to implement: Overall, creating a holiday email campaign requires some planning - so get started now! Expect to spend at least several hours designing your plan and another several hours crafting and testing each individual message.
Testimonial And Guarantee Secrets That Sell More (4)
-Would you like to see any aspect of your (product) changed? This question shows your customer you do care about his feedback, alerts you to any problems you may not have been aware of and gives you a chance to improve your product.
The Quickest Way To Double Your Money (5)
Where do you start? Geez, I wish someone would have made me ask that question of myself 10 years ago, maybe I could have retired at 45 instead of 55.
Web Design Creation Options (6)
As a web designer, you should design your websites to give your visitors the greatest ease of use, the best impression and most important of all a welcoming experience. It doesn't matter if you had the greatest product in the whole world -- if your website is poorly done you won't be able to sell even one copy of it because visitors will be driven off your website by the lousy design.
Order Form Secrets To Help You Sell More (7)
One of the most important things to do is ask your prospect to respond right away. Without asking and implying a sense of urgency in the process, the prospect may think he can leave your site and come back some other time and not miss out on anything.
Search Engine Marketing - 5 Key Components (8)
You want to pay attention to five key components of search engine marketing to grow your online visibility. You want to build links to your site, a site that has the right keywords in its text and online articles, so that search engines know what you're all about.
Using Social Media To Develop Your Online Brand (9)
Bookmark sites can help you significantly if you create some friends who become interested in your bookmarks. As they share your bookmarks they will gain more and more exposure, which will result in additional exposure and search engine benefit.
Executing Your Internet Marketing Strategy (10)
You are going to need to rely on those goals and motivations when the going gets tough. Once your goals and motivations are outlined, you will want to make a map of how you are going to accomplish them.
Writing Follow Up Messages For Autoresponders (11)
To ensure that you get a sale, you should include comparisons between what you offer and what competitors offer. This way, you'll show potential customers that you are indeed the best, with the best features and the best prices.
Secrets Of Success With Autoresponders (12)
Almost all successful affiliate marketers have used an autoresponder at some point in time. An autoresponder can make business a lot easier, and enable you to contact all of your customers or potential customers with the click of a button.
How To Conduct An A/B Split Test (13)
So you run an A/B test. You keep your control page active at yourwebpage.com then set up a new url, perhaps something like yourwebpage.com/test. On this new page, you duplicate everything on your control page and change only one thing: the price.
Drive More Business To Your Website With Internet Marketing (14)
Its changing in a very big way. Next article we will talk about the changes in search engine optimization and what you can do to keep on top of those changes.
Promotional Advertising Scams On The Internet (15)
One thing is certain, product advertising strategies in the Internet is not simple but it is fun, especially when one fully understood the power of the Internet. It is not a unidirectional medium of advertising and promotion like in radio or television, but it is a dynamic and interactive avenue for both the advertiser and the prospective customer.
The 5 Laws Of Writing Network Marketing Blogs (16)
Marketing methods such as blogs, allow marketers to speak to people anywhere on the web. In the old MLM business model most marketing had to be done within your geographic area by chasing people down the street like a sleazy salesman.
5 Strategies For Optimizing Online Press Releases (17)
If you don't have the writing skills in-house, you can easily outsource your Press Release writing projects through such service marketplaces as ESalesGuru.com Craig Cannings is the owner and managing director of ESalesGuru.com, a innovative marketplace connecting ebusinesses with niche Internet Marketing Specialists and Firms worldwide.
How Higher Search Engine Rankings Can Help Your Business (18)
Topics: higher search engine rankings Higher search engine rankings: They're supposed to be invaluable to your business. Below, find out what they are, exactly, and how they help. More visibility: Basically, increasing your search engine rankings mean that your site is higher up on the search engine lists than it used to be.
Effective Search Engine Optimization (19)
Catchy Domain Name: What better will make your prospect visitors remember your website but with a very easy-to-remember domain name. It must be something sweet and short so that it will prove to be very invaluable.
Get Listed On The First Page Of Google (20)
Many large companies have several people doing seo on their sites at the same time. The more energy and knowledge you invest, the better your placement will become over time.