Most of us who manage marketing campaigns in ecommerce get caught up in the daily grind of writing ad copy, tweaking creative, and managing ad spend. If you’re running direct marketing campaigns (search, affiliates, display, comparison shopping, etc.), you’re likely to be highly focused on measuring ROAS, number of new customers, or AOV.
While these tactics are valuable for building a solid customer base, none of them sufficiently address an equally important challenge: managing the customer life-time-value (LTV). Within most marketing channels, ALL customers/orders are created equal, which means you’re paying the same amount to acquire customers–regardless of quality. The best way to approach this problem is to ask a simple question: “which customers are going to keep me in business for years to come, and who’s sucking cash from my bottom line?” In other words, what’s a given customer’s true lifetime value, and how is s/he driving the future of my company? In this case, it’s more than likely that the 80/20 rule applies to most companies.