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Further
Reading ...
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Managers and PR: One Thing Is Clear - Robert A Kelly
As a business, non-profit or association manager, you have a clear choice when you set up your public relations. Arrange your resources to generate a variety of product and service plugs on radio, and in newspapers and in magazines. Or, use a...
Doh! A Home Biz Even Homer Simpson Could Do - Jon Castle
Everyone likes Homer Simpson, moron that he is, because let’s face it—there is a little Homer in all of us. Have you ever come across a business opportunity you would have liked to try but didn’t because you were afraid of your own ineptitude? Well,...
Crisis On the Home Front - Lisa Reddell
Viruses, spam and system crashes are just some of the challenges that online business owners face on a daily basis. But there is another challenge that many online entrepreneurs may overlook. Across the globe, Mother Nature wreaks havoc with ...
Reminders For Running A Better Business - Chuck and Sue DeFiore
The following tips are from an article we contributed to Compute magazine. These are ideas that we all should know, but many times forget. It constantly amazes us how quickly a basic tenent of business can be shoved by the wayside in the heat of...
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Lifetime Value Online?
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Written By:
David Bell
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In "Big Time Banner Advertising," we discuss the importance of establishing an acceptable level of return for your promotional investments. This number becomes the criteria for what is deemed a success and what is deemed a failure. How you determine this number is not only critical to the success of your advertising efforts, it's also critical to the ongoing success of your business in general.
Many dot-coms make the 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 the 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 the location of your nearest grocery store, these types of online lock-in are clearly - continued below ...
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far more fragile.
Many online businesses find themselves in serious trouble when they acquire customers based on a lifetime value calculation that simply never materializes as their customers click away to the latest deal of the day.
In "Big Time Banner Advertising," it is recommended that a cost-per-order target be used instead of lifetime value. A cost-per-order or CPO target simply allows you to treat each order as a one-time event. By setting a CPO target, there is no guesswork as to what a customer may be worth to you in the future - you know exactly what customers are worth on a per-order basis.
For example, based on your product margins and average order size, you may determine that $5 is the most you can pay for each order while still meeting your business objectives. This number becomes the CPO target for your marketing efforts. Marketing efforts that achieve this target CPO or better are "keepers" while those that don't get killed. A banner ad that costs $1000 and drives 250 orders is a keeper. A newsletter ad that costs $100 and drives 5 orders doesn'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 and advertising efforts more efficient, effective, and profitable.
I hope this helps in your future marketing decisions.
About the Author
David Bell is Manager, Online Marketing, at
http://www.wspromotion.com/ , a leading Search Engine Optimization services firm and Advertising Agency.
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Just Think ... - Joyce C Lock
If you're a salesperson (not only because it's a job but, you actually happen to be good at it), just think. How many sales did you make last year? Last month? Last week? A lot? Probably, you would have sold more in a better economy. Though still,...
Ignore PR at Your Peril! - Robert A Kelly
Please feel free to publish this article and resource box in your ezine, newsletter, offline publication or website. A copy would be appreciated at bobkelly@TNI.net. Net word count is 770 including guidelines and resource box. Robert A. Kelly ©...
Is Your MLM About To Go Bankrupt and Leave You Flat? - Ted Riley
Introduction Investing in a legitimate MLM is probably the best way to ensure that your MLM is not going to go bankrupt on you. This is not always an easy thing to ascertain even when you have access to detailed information about the multilevel...
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