Measuring & Managing Visitor / Customer Retention

You have probably heard or read references to the "portfolio" approach to managing customers and their value. I think it's a sound idea and one I have used over the years because it's generally quite easy to understand in theory, though the actual implementation is always left for you to figure out on your own. So we're going to take a look at this portfolio approach for managing customers and I am going to supply you with the implementation tools you need to actually make it work. This is an important chapter, because understanding these concepts will provide you with the very foundation needed for developing all of your Data-Driven marketing campaigns and programs. The general idea behind the portfolio approach to customer value management is this: your customer base is a business asset. Businesses can have lots of different assets, for example, real estate holdings, buildings, inventory, and common stock, along with other financial instruments. Each of these assets has a value to the business. This collection of assets is an "asset portfolio," just as you may hold your own personal portfolio of stocks. The assets in a portfolio have a current value, which is what they can be sold for today. As we know, there can be changes in the current value of an asset portfolio over time, as what you can sell assets for changes almost daily. Assets also have an "expected" or future value, which can be rising or falling as well, depending on the market for an asset and the type of asset it is. For example, real estate generally appreciates in value over time, but machinery generally declines in value over time. This means at any point in time, an asset has a current as well as a potential or future value. The customer base can be viewed as such an asset as well, and in fact, each customer has a current and a potential value. The current value is whatever the customer has created in value for the business as of today. Current value could be the cumulative profits for the customer since they became a customer, or the cumulative advertising value of all the visits made to a web site since the first one. Potential value is the future stream of profits expected from the customer as long as they continue to be a customer. If the customer terminates the business relationship, the potential value of the customer drops to near zero; this is the end of the customer LifeCycle, the defection by the customer. In simple terms, the sum of Current Value and Potential Value is equal to the LifeTime Value of the customer; it's the Total Value contributed by the customer to your business. If customers in your customer portfolio have both current and potential value, then you can set up a 2 X 2 chart describing the value of your customer base in terms of current plus potential value (LifeTime Value): (click the link below to see chart) The Guide to Web Analytics and author of downloadable here. If you need to sell more to customers while reducing marketing expenses, get the first nine chapters of the Drilling Down book free at Ask Jim a Traffic Analysis Question!