Customer lifetime value in social media

Customer lifetime value in social media : Is the calculation viable or not?

social customer

With specialization coming into everything that we can see, hear, feel or touch, the world looks set for specialists. And when we move into the spheres of marketing, we come across a term that is increasingly being used today – Customer Lifetime Value or CLV. Customer Lifetime Value can be broadly defined as the difference between the total revenue from the customer and the total costs on the customer. If it can be determined, it will prove to be the most important metric for any business.

The metric shows that not every customer is equal – some are in fact more equal than the other! Thus, apart from gaining more customers, the marketers emphasize on getting more valuable customers. They state that quality, will ultimate score over quantity. There is definitely some truth in this line of thought. But that truth starts losing its veracity when pulled too far. What do we mean by that?

Social media strategists are the ones who back CLV figures in a resounding fashion. They attempt to make gainful use of social media like Facebook, Twitter, YouTube and the likes to increase customers and also valuable customers for a business. The cost of such social media campaigns are not very high compared to, say, direct marketing via mail, telephone or company-representative visits. Thus, when the marketers and strategists present the customer lifetime values to add importance to the social media marketing campaign, you should keep your eyes and ears open.

Here are some hard truths about the calculation of the CLV. When it is being done for an individual, it works out fine but which company has the time to invest in each and every individual? That is where the average CLV in a business needs to be determined. And getting this value is simple mathematically, but very difficult realistically!

The average CLV calculation requires large sets of data on the customers. If the data set size is small, the results and conclusions cannot be called statistically sufficient. Again, there are highs and lows in businesses based on the time of the year. Christmas may see a surge in sales but the autumn may not! The calculation, therefore, needs to be done over an extended period of time. Again, one would have to consider many different key-performance indicators before drawing conclusions. And doing all this would require some serious brains!

Therefore, while the CLV is an awesome metric to obtain, it is definitely not meant for start-ups and beginners. This metric should be the crowning glory of all the statistics and definitely not the starting point! If one happens to be a start up, there are other simpler ways to evaluate the impact of social media campaigns. It becomes evident that CLV calculations are not viable for all.

The simplest way to evaluate impact, rather than use the CLV, would be to maintain a thorough log of all the social activities on a social calendar. Then, keep a track of all the possible social metrics like the number of likes, the new followers etc., as they evolve with time. Finally, as in Google Analytics, obtain all the metrics for the website over time. Overlap all these three – social activities, social metrics and website metrics – in a graph and you can draw some pretty decent conclusions.

HTC Sensation XE

“In regards to the post, I like it but you’re both right in that it doesn’t exactly tie in with a lot of our articles and doesn’t quite relate to our community, despite being a helpful post in general. If you could get Alia to add in or talk about the correlation with twitter as a designer might use it (or I could extend/alleviate some writing) I think that would add a lot of value to the post that would otherwise not relate a ton to our community of mostly designers and freelancers.”

About the author: Alia Haley is a blogger by profession. She loves writing on technology and luxury. Beside this she is fond of cellphones. She recently bought a HTC Sensation XE herself. These days she is busy in writing an article on iPhone dock.

Article publié pour la première fois le 17/01/2012

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