A Lesson In Calculating Lifetime Customer Value For Digital

The amount consumers spend with any one brand during their lifetime varies. The estimated amount should factor into brand marketing budgets from display and video to search. A panel of experts discussed this topic at the MediaPost Search Insider Summit on Monday. The Internet was built on the promise of tracking everything, but marketers soon discovered the fallacy.

The panel discussed standards and key performance indicators (KPIs). Traditionally, marketers figure in cost per lead and cost per acquisition, but these days it's important to consider engaged leads and combine metrics from revenue, said Effie Philippakos, director of analytics at AIG.

The group doesn't claim to have the perfect metrics, but here are some tips to get started. For starters, take the average order value and multiply it by the frequency of the orders. Factor in less discounts and the cost of maintaining the relationship.



Marketers need to include the cost of service when determining the life value of a customer. Sometimes companies acquire customers that look good on paper, but really cost overall in the long haul. They drain resources, are difficult to deal with, and are not the type of customer the company wants to support.

Look also at in-margin profit dollars produced. When looking at the value of a customer, it's not just about what it costs to acquire or serve them. The company needs to produce profit dollars. If it doesn't, the company is acquiring the wrong kind of customers.

Ryan DeShazer, EVP and managing director at inVentiv Media 360, led the discussion with Philippakos, along with Dale Edman, VP of ecommerce at Wasserstrom; Ian Gilyeat, president at ERT America; and Dean Skonieczny, VP of products at Adlucent.

View the discussion here.

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