When we make investment in digital marketing, we’d love to see results that encourage us to spend more to get better results. We need to take time to find out if our online investments are yielding the right results commensurate to the money we are spending.
Digital marketing is both a science and an art because, from the art point of view, you need creativity in story telling especially when you are focusing on content marketing. It is a science because you need a mix of mathematics and economics to be able to analyse your investment and how it’s working out to boost your bottom line. Because in clear essence, the reason you invest is to ensure you get your desired results whether it’s getting more leads; closing more sales or getting prospects to sign up for your newsletter –what concerns you is just to get the result.
I was just blind
Starting out with my online marketing investment, up till date I think I’ve spent quite a lot but my returns were not quite encouraging. I kept on spending without really defining what I wanted. Well for me I wanted the word out and wanted to get more opportunities to get business. Yes it yielded some result but I guess I wasn’t really down with pen and paper to take time to calculate my spend over the results I was getting. I shared my experience here.
In the initial setting, you ought to quickly make a budget of what you want and see how the advert campaign runs to see the results. What I mean is that you can make a specific advert budget for Google Adwords say N10,000 and specifiy your advert to run on $5 (approximately N1,000) pay day. This advert will run for 10 days consecutively (depending on your advert settings). After the completion of your campaign, you can analyse your results as it relates to what you hope to achieve. If, for example you want people to subscribe and at the end of 10 days, you get 2 people, this means each subscriber costs you N5,000. In the long run what are you hoping that the subscriber would do? Buy a product or patronize a service. Now let’s place a naira amount on that product or service say N7,500. If those two subscribers end up buying after your target marketing campaign, that means your gross profit is N2,500 If your other overhead cost is say N500, you have a net profit of N2,000 on each subscriber you can get. So how’s that for some little uncomplicated mathematics (that I’m just getting to like).
Customer Lifetime Value, CLV
What is life time value of a customer?
It is a prediction of all the value a business will derive from their entire relationship with a customer . Because we don’t know how long each relationship will be, we make a good estimate and state CLV as a periodic value –that is we usually say: “this customer’s 12 month (or 24 month, etc) CLV is Nx”–culled from custora.com
What can you do with Customer Lifetime Value?
Customer Lifetime Value is the single most important metric for understanding your customers. CLV helps you make important business decisions about sales, marketing, product development, and customer support. For example:
Marketing: How much should I spend to acquire a customer?
Product: How can I offer products and services tailored for my best customers?
Customer Support: How much should I spend to service and retain a customer?
Sales: What types of customers should sales reps spend the most time on trying to acquire?
How To Calculate CLV
We’re goig to use an infographic to better illustrate how to calculate your customers lifetime value
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Source: How To Calculate Lifetime Value