Customer Lifetime Value: The Best Value For Your Marketing Dollars
October 28th, 2008 by Chris Herrick
You know my favorite commercial right now? Cash4Gold. Not sure if you’ve seen it , but for some reason it always seems to pop up when I’m watching TV at the gym. The premise is straight-forward: Cash4Gold sends you an envelope, you stuff all that gold just laying around the house into this envelope (old wedding rings? Stuff it in. Great grandma’s necklace? Stuff it in. Gold rope you used to wear in high school? Stuff it in). You then send that envelope to the folks at Cash4Gold, they assess the value, and in return, you get - you guessed it - cash. Wow, great, huh? Yeah, just a few questions on this side, like:
- Who are these people??? Who has loads of gold just lying around the house?
- And, let’s say you do have lots of gold just laying around, would you really be willing to stuff all that gold in some random envelope and send it to some company you’ve never heard of before? Especially a heavy, jingly envelope labeled Cash4Gold.
- Lastly, would you trust them to be fair with the amount of cash you get back? I mean, in the end, they’re sitting there with all of your gold, and you’re sitting with - I don’t know - anticipation?
I have to admit that it makes me laugh every time I see it.
On a more serious note, the reality is that Cash4Gold’s business is based on finding people who either don’t know the value or undervalue their existing assets: in this case, gold. These are, for many people, hard times and the allure of quick cash can be appealing, but a quick trip to a local appraiser would probably give potential customers the insight they need to determine whether or not they were getting the best value.
Sure, it all seems straight forward here, but if we shift the paradigm, and look at how online retailers value their assets, it’s always surprising to me to see how few companies are currently using customer lifetime value to determine best value of their marketing dollars. Companies aren’t immune to the allure of quick cash either, but in these times and this competitive environment, who can afford to spend money on the customer who is unprofitable through coupons and returns and not on the one who is ready to buy and just needs the right prompt. Customers need to be appraised too and CLV is the most accurate way to do that. (As an aside, if you’re not familiar with CLV, please check out The Customer Lifetime Value Formula or our Customer Lifetime Value Calculator.)
So, just as in the example above, if you’re not doing it already, find someone who can help you appraise your customers, and this holiday season, make sure you’re getting the most value for your marketing dollars.
Tags: clv
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