To be able to optimize out marketing campaigns to existing customers, we need to make sure we have all the data required to be successful.

As I have mentioned before, you need to track all customer sales in a database, whether it be in a simple excel spreadsheet or a CRM tool, it doesn’t really matter.

The basic information to track is as follows.

• Customer Name

We need this purely for identification purposes.

• Customer Contact Details. Tel cell and mailing address

We use the contact details to be able to keep up regular communications with customers for follow up marketing purposes. The more contact details the better. Contacting customers via all available contact methods maximizes the results we receive from our follow up marketing.

• Customer demographics (if available): Gender, Age, Industry Etc.

Example, a health business person, you have an easy excuse to collect age and gender as this fits with knowledge required by health professionals.

Base on demographics, we can easily tell what the best method and products we will target when marketing to these customers. Women for example will respond to different products or marketing messages then men.

• First purchase date.

This data is required for us to track the purchase frequency of this customer

• First purchase product name

Product purchased allows us to tell what type of products this customer prefers, and allows us to market complementary or advanced version of similar products to them.

• First Purchase Spend

This purchase spend allows us to track the value of each customer over a period of time. This ties into the lifetime customer value as discussed in the last article.

• Second Purchase Date etc.
• Second Purchase Product Name etc.
• Second Purchase Spend etc.

So how do we use this data?

First of all we will be using this data to analyze and group our customers based on frequency of purchases, total spend, and over what period of time this occurred.

In any business, you will always have your loyal rabid customers who will trust almost anything you say and buy anything you sell.

From the above data we want to determine our top 20% of customers buy determining who purchases the most from us over the least period of time.

You can chart your customers over a time period, say 4 months, and from this chart you can see which top 20 customers have purchased the most from you within this 4 month period

We then want to spend the majority of our time and cultivating these customers and building a good relationship and marketing to them.

It’s been proven time and time again that your top 20% of customers are responsible for 80% of your revenue so you make the ultimate best use of your time focusing the majority your efforts on these customers.

In the other side of the coin its worth mentioning that 80% of headaches and support issues and waste of time communications come from your bottom 20% of customers. So you can cut away most of the time wasting tasks by trimming out our bottom customers, giving you more time to focus on your top ones. Some customers are simply not worth the time spent on them!

So simply tracking the above data, you can easily increase your profits by knowing where to focus your attention and marketing efforts/spend, as well as drastically reducing time wasters by trimming out certain customers who are not worth keeping on.

This is 1 of 2 articles that focus on marketing metrics and the value of analyzing and measuring all your marketing efforts and customer data.

Once you understand your marketing metrics and customer data you are in an incredibly valuable position whereby you can tell exactly what works and what does not, what you should do more of and what you should stop doing with regards to your marketing spend.

The lifetime customer value metric aims to calculate how much each of your customers are worth on average through a certain period of time, usually a year.

Let’s say on average each customer spends R4000 with you over a period of 1 year. What can you do with this information? Well, this number tells you exactly what you can spend in acquiring each customer.

Most businesses only focus on generating more profit from the first sale then they spend on advertising or other lead generation sources.

This does not take into account your back end sales.

So, let’s say that as a personal trainer you begin a new lead generation campaign for R4000 each month and get 10 new customers at R300 each, for your fitness training program. That would be R3000 revenue off your R4000 advertising spend.

Initially this would seem like a loss, and most business would stop this advertising immediately.

What’s not being taken into account here however is the value of these customers after the initial sale. Now after our previous tutorials on back end sales, you understand that these customers are not only worth their initial sale, but any sales you can make to them in future.

So, let’s say you had a good backend in place and and know that 50% of your customers will make 2 additional purchases from you over the next 2 months at R400 each.

So now we know that the 10 customers we acquired with our new campaign are actually worth the R300 initial sale (10 * R300 = R3000) PLUS 50% * backend (5 * R400 = R2000) = R5000.

So, in reality the advertising campaign is profitable and not the other way around, as we initially though.

(By profitable make sure you taken into account any additional costs in acquiring those customers, that may not be covered by the cost of the lead generation campaign)

By understanding this metric, it opens up many more avenues of advertising and marketing that you would not have considered before and gives you the power of knowing exactly what you can spend to acquire each customer.

This calculation does require you to have certain data on hand, and most businesses won’t have the customer data on hand to make this calculation right away. You may have to start going over purchase records to be able to put this data into a usable form.

Actions:

What I would recommend however is begin tracking the correct data from today.

Make sure you track each customer, what they buy, when they bought and at what price over a period of at least 6 months.

Make sure you implement a good back end sales process and optimize it to your satisfaction.

After 6 months of tracking your customers and sales that have resulted from your current front and back end sales process, you will now have the data to calculate lifetime customer value.

The calculation: Simply take your total revenue for the 6 month period and divide it by your number of customers. This will equal your average customer lifetime value.

Now you will be able to compare the results of all advertising & lead generation campaigns against customer lifetime value and have an accurate picture of which campaigns are profitable or not.

You do this and you will be be able to run profitable and successful campaigns in many mediums and locations that you competitors wont, because to them it will seem like an unprofitable endeavor. It will leave them mystified on how you could possibly be doing what you are doing.