Re: Evaluating a customer's lifetime value
LARRY RAUBACH WROTE:
> When one determines lifetime value, should some form of
> subjective, or otherwise, figure be also used to
> reflect the spin-off benefits a company will likely
> realize due to this "lifetime customer" speaking highly
> of the company to family, friends and associates over
> the years?
There are no hard and fast rules for calculating
lifetime value. Your formula should be based on your
business parameters. If word-of-mouth and other
indirect referral business is integral to your revenue
model, your ROI and LV equations need to reflect both
the costs and measurable (in whatever terms make sense
for your business) results of these efforts. Given the
difficulty of quantifying referrals, however, it seems
unlikely you would be able to obtain reliable numbers
for these calculations.
At the same time, the "viral marketing" techniques
developed to facilitate word-of-mouth referrals provide
measurable results but also carry associated costs. If
you are committing any resources to supporting a
customer testimonial/referral program, those expenses
probably belong under the "lead generation" heading on
your ROI spreadsheet.
Hope this helps.
Best regards,
Chris Brandlon
Strategic Director
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Directivity
The Interactive Marketing Communications Agency
cbrandlon_at_directivity.com www.directivity.com
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Received on Wed Apr 12 2000 - 10:56:35 CDT
