Customer Lifetime Value – Your Business’s Most Important Statistic

Customer Lifetime Value

The lifetime value of a customer is perhaps the most important item of data you can collect about your business. It is in clear monetary terms how much each customer is worth to your business.

With it you are able to decide how much to spend on all advertising, customer acquisition and customer retention.

Without the customer lifetime value you are at the mercy of the profit margin on the average order value which for most companies will be significantly less and complicated to calculate.
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Building Web Success Series

I recently co-wrote a series of articles Building Web Success with Marty Lamers, a writer and SEO with AdvanceMe, Inc, America’s leading Merchant Cash Advance provider,

The first couple of parts are already live:

The final part Conversion Rate Optimization will follow in the following week. (Link will be updated here when available).

Marty is a great copywriter and editor and it has been a real pleasure working with him on these articles.

In the near future Marty and I will do a back and forth SEO “Ping Pong” interview and particularly focus on copy writing as an integral part of the sales process.

Segementing Reports In Google Analytics to Gain Valuable Insights

Patrick McKenzie writes software that allows you to make bingo cards and often blogs about programming and business on his MicroISV on a Shoestring site.

He’s recently published The IE CSS Bug Which Cost Me A Month’s Salary and in it details a problem in which users in MS Internet Explorer 6 & 7 were not seeing the “Sign Up” button. Although they can still press enter to submit the form most users had a pretty hard time converting.
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Calculating Your Conversion Rate

With most modern analytics packages the conversion rate can be calculated within the system fairly easily if you’ve set up the appropriate goals and tracking.

Conversions are any event which you consider to be a goal of the website.

For most e-commerce sites, this will be a sale. For other sites the outcome the site needs may be to get the visitors’ email address, for the user to leave a comment, download a file or to click a particular link.

There are two calculations commonly used to calculate the conversion rate. One is to take the total unique visitors over a period and divide by the number of conversions.

Conversion Rate = unique visitors/conversions

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Analytics Adds Accounts Overview Giving At A Glance Data

Amongst other recent Google Analytics changes such as the new data segmentation features, the accounts overview may appear as a fairly small addition, but this lets you quickly and easily see changes to your sites and accounts for day, week, month and year periods without having to drill down into individual sites. This feature can therefore can alert you to any problems or unexpected successes far earlier than your regular analytics schedules might allow.

Here we’ve displayed the “all accounts” overview, from here you could then get an overview for individual domains within the account. This overview can be so useful that it might be wise when building new sites to theme the analytics accounts to contain sites with similar content or revenue schemes into groups.

Within each account, you are now presented with a similar overview but for each of the individual websites. Again you can display the data in day, week, month & year views. Data is displayed for visits, average time on site, bounce rate and completed goals which can be selected as the percentage change.

Benefits of the Accounts Overview

  • Theme similar domains into content, geographical or revenue groups
  • Save time keeping an “eye on things”
  • Use the daily figures to spot domains with problems
  • Quickly spot emerging trends with weekly view
  • Get a deeper feel for the traffic levels throughout your portfolio
  • Spot low traffic domains with potential that otherwise get ignored.

Using this data you can quickly see the changes to individual sites without having to visit all the separate domains specifically, any emerging traffic trends you spot can be developed or countered quickly.

Are there other uses for this presentation of the data that you’ve discovered? Please do comment and share.

Using Google Analytics Segmentation To See Value of Existing Customers

Recent changes Google Analytics added include segmentation amongst other features and further increase the benefits for SME e-commerce sites to implement it as an information source.

To select the segmentation click the drop down in the top right of the dashboard, “Beta Advanced Segments” which is initially defaulting to “All Visits”. Here we’ve selected both “New Visitors” and “Returning Visitors” which combined still provide the “All Visits” data so that too remains selected.

The dashboard updates and includes the three visitor types in the traffic seen. Here you can see “all visits” in blue, the “new visitors” in orange and “returning visitors” in green.

With the overview of the visitor types we can quickly see, for instance, that returning visitors visit, for this site, half as many again pages as new visitors.

Selecting the Ecommerce panel from the left hand menu will display conversion rate data for the three segments, All Visits, New Visitors and Returning Visitors. This is both graphed for the selected period and various aspects of the data is displayed below.

You can instantly see that returning visitors convert at a much higher rate than new visitors, and from the segmented data below you should notice from the Average Order Value and other sales data that they not only convert at a higher rate but also spend more money and purchase more products.

This data gives an incredible insight into the value of your exiting customers. If you maintain the customer lifetime value then you will already be aware of the hidden value of your existing client base. With these graphs we can instantly see that the returning visitors provide 50% of the revenue from 28% percent of the site’s hits.

From this analysis, you might decide to concentrate more on retaining customers and increasing communications with them, as their interactions with the website are more valuable than a new visitors. However, knowing the value of your existing client base should help your PPC campaign bidding as you gain a further insight into a clients lifetime value to your business. You may therefore decide to bid for more than just the initial ROI on the opening visit and sale. Afterall, extending your customer base will increase the number of clients who can become repeat customers for you.

Have you found any other uses for the new segmented data from Google Analytics? Please feel to comment below.