Increasing customer lifetime value

Every marketer wants to increase the lifetime value of their customers. One of the best ways is to make sure that the consumer only thinks about your brand/product/service/store/e-commerce store before making a purchase.

Amazon prime is a perfect example of a service which can be used to increase the lifetime value of consumers. This service is a one-time annual fee and provides free 2-day shipping and next day shipping for only $3.99 on most of the products sold on Amazon.com.

By providing such a service for a minimal fee, Amazon has secured all the consumers who have signed-up for this service. Amazon is one of the largest collections of products across all categories – household products, baby products, electronics, books, tools, clothes, grocery, and apparel. Therefore, the chances that you will not find a product on Amazon are very few.

They have also made sure that a consumer, when is ready to buy a product, uses only Amazon.com to find the product and checkout.

A consumer previously would have done a lot of research on various comparison shopping engines like Shopping.com or Pricegrabber.com and put in a lot of time to find the best deal. Now, the same consumer who has signed up for Amazon prime would just go to Amazon, find the product and check out. This would save a ton of consumer's time and the consumer would also get the product delivered to their doorstep in 2 days or even next day if they pay $3.99.

I have been using this service over the last few months and have ended up make more and more purchases from Amazon. It all started with monthly diapers, then I ordered a multi-function printer, then I got a car seat for my son, then comforters, duvet cover and the list goes on. Living in the city of Chicago, I save on 10.5% sales tax and get the product gets delivered to my doorstep in a day. I used to order only a few products annually from Amazon but now, I order a product almost at a weekly level. Guess what! I also have the Amazon rewards credit card now, which has hooked me to Amazon. I have even ordered products from Amazon using my phone, as I was at a physical store which didn't have the actual product I was looking for.

From a marketing analytics ROI point of view, if I was running the Amazon prime program, I would love to do the analysis of shipping cost vs. the increase in the consumer lifetime value. As the service has been available for a few years, I am assuming they have a positive return and is helping increase profits.

This indeed is a classic case of increasing consumer lifetime value.

Launch Campaign, Measure and then….

I have worked on a lot of online campaigns, majority of the times the campaign is launched, and then the analytics team typically starts reporting on the KPIs (Key performance indicators) on a weekly or bi-weekly or monthly level.

The key question is what does the strategy or the marketing team does after getting the results. The marketing team should look at the reports carefully at the most granular level (placement or creative) for display campaign and then start optimizing based on the results. Sometimes combination of metrics needs to be taken into account for example the cost, engagement rate, interaction rate, conversion rate etc.

It is very important that the optimization takes place sooner rather than later. The optimization process should be establish and then followed week over week. I have seen that this is very important for campaigns whose key success metrics are ROAS or ROI. As the campaign manager is trying to generate highest revenue for each dollar spent.
If the campaign’s purpose is to increase the branding/engagement then it is important that the placements driving higher Click-through or Interaction rate should be served higher impressions. The relevant publishing sites should be used. The capability of Ad networks like Ad.com, Specific Media, and Context Web should be fully utilized to get lower priced media and target the relevant consumer targets.

Some portals like Yahoo! are also able to use Behavioral Targeted placements to better target the consumers to help increase the brand awareness and also increase the conversion rates.

The key is to start optimizing sooner rather than later..

Measurement Plan

Writing up a Measurement Plan is very important especially for the skeptics. As I have learnt over the years it helps explain the "WHY MEASURE" and the "HOW TO MEASURE" of measurement process for a campaign.

This document is often skipped and this causes problem like the various parties involved in the campaign launch are not on the same page. One example is: The agency and the client being on the different page in terms of campaign objectives, KPIs etc

This document ensures that all the stakeholders of the campaign (agency, brand manager, product manager, marketing team, advertising team) understand that campaign objectives, consumer flow, KPIs, reporting needs, dashboard structure and the reporting frequencies.

What constitutes the plan:

1. Campaign Overview
2. Consumer Flow
3. Tracking mechanisms like DART tags, Webtrends tags, Google Analytics, Omniture Tags, Hitbox tags, email vendor tracking etc
4. Diagnostic Metrics - example: CTR, Interaction Rate, Email open rate, Email click rate, Phone answer rate
5. Success Metrics - example: ROAS, ROI, Conversion Rate
6. Dashboard - showing the key metrics help to understand the performance of the campaign. Data representation is an very important part the process. I will be providing some illustrations soon.
7. Reporting Frequencies

Happy Measuring....

Measurement Process

Yes, like for everything else there is a process which helps in measuring accurately. Just as a top line, the following steps are very important:

1. Define the campaign objectives
2. Define the key performance indicators i.e. success metrics
3. Anticipate or forecast the results, example acquire 100,000 new clients or generate $1,000,000 in revenue or generate a ROI of $5
4. For online marketing - make sure the tracking is in place to get the accurate data
5. Analyze the data and Report Results

And the circle of Measurement continues….

Why & How Measure?

The first thought to everyone's mind is why do we need to measure? Well, so I guess a very simple answer is that - you measure so that you know what you got out of your marketing campaign or marketing dollars. If you are a brand manager, you need to justify that spend. If one spends $1 MM what do you get out of it?

You cannot quantify everything in terms of ROI i.e. how much revenue did we generate by spending $X. There are many other ways to measure marketing:

1. Brand - How many more people know about my brand i.e. did the awareness of my brand increase? One can measure this by conducting surveys for example using Dynamic Logic.
2. Increasing visits to your website is an indicator that your marketing dollars are paying off.
3. Increased unique visitors, time spend on the website are some other metrics which can be used

Many a times as an advertiser, one needs to justify why does he/she needs that $10MM budget. OR what we also call as Business case.

Sometimes one needs justify in terms on "$" value that spending $10MM would help the business's bottom line by $20MM. Based on each business model, there are different ways how this can be done.

The simplest and easiest way is to use a ROI model i.e. Revenue/Spend to get the amount of revenue generated per $1 spent in marketing.

If ROI is not the measure, which is actually not possible in a lot of cases where there is no e-commerce platform, there need to be other ways to create business models. For example: If there is a action that an advertiser wants the consumers to take - it would be a good idea to attribute a "$" value to that action. This action could be "find a store" or "contact us". So, if you know that for every find a store, a consumer would make a $100 purchase, you can attribute revenue to each "find a store" and thus be able to work on your business case.