Do BMW Get The 'Best Sales Value From UK Adspend'?

Media audit agency Billets recently looked at UK motoring brands and claimed that BMW get the best value from its advertising. Their report stated that over the first 8 months of 2008, BMW spent an average of £22 on advertising for each new car registration compared with £114 for Ford, £389 for Renault, £1,600 for Lexus & £2,745 or Cadillac.

Can we accept these figures?

The calculations were based on ad spend which is not necessarily the same as marketing spend. e.g. marketing spend in other areas such as direct marketing, events, show rooms etc would not have been included and may impact the above results. It is not clear whether internet marketing spend was included or whether the figures were just based on conventional advertising spend such as TV, press, outdoor posters & radio.

What about phasing?

The study ignored effects due to phasing. When I was at Asda I did an econometric study that proved that Asda's TV advertising gave an immediate (but short term) uplift in stores sales in the week of advertising. i.e. if people liked the ad, we attracted more people to the store and sales went up. However, non-adverting factors such as store location, product range, product quality, product availability, prices and in-store experience determined whether they came back the following week.  

Most people change their car every 3 to 4 years. If you have a 1 year old car and see a great ad on TV, you are unlikely to change your car the next day unless you are on a premier league salary. So great car ads are likely to have a longer carry over effect. BMW are claimed to have benefited from higher advertising spend in previous years. It may be that Cadillac will see a carry over effect and benefit next year, but in their case I doubt it.

What other factors might influence sales?

Advertising will be a key influence on attracting target prospects to the showroom (or website). Whether those prospects convert to customers will depend on a range of factors, such as: the appearance of the showroom; the quality of the sales staff; pricing; trade-in value; brochures / website quality; finance deals; lead-times and of course how well the car meets the prospects rational and emotional requirements. 

Are BMW that good?

In each sector, BMW's have a significantly higher price point than Renault yet according to the figures above, Renault spend 17 times more on advertising per sale. BMW consistently deliver industry leading profit margins.

Undoubtedly, BMW have a formidable track record of great advertising over many years. But BMW's long term success is due to much more than advertising. They have a great marketing strategy (Ultimate Driving Machine) that is consistently delivered at every customer touch point. This marketing strategy drives everything they do and enables them to deliver consistently superior cars that are the most benchmarked vehicles in the industry. 

Good marketers know how far they can stretch their brand & BMW have successfully stretched their brand (without compromise) from a small 1 series to the luxury 7 series. In contrast, VW produce good small and mid size cars but can't stretch their brand to sell £40,000 plus Phaetons without heavy discounts. It may be a very good car but, for some the VW badge does not communicate the right message.

Good marketers also know their limits and BMW were wise to keep the Mini as the Mini rather than a BMW 0. However, they did add their engineering expertise. They also knew when to quit after committing the 'ultimate blunder' with the purchase of Rover. For an excellent insight to BMW and their marketing take a look at David Kiley's Driven.  

So, despite some reservations about the methodology used in the Billets survey, if a full econometric study was carried out I wouldn't be surprised if BMW still achieved the highest marketing ROI.

 

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

How Do You Convert Prospects To Customers & Grow Customer Life Time Value?

Most buyers (consumers or business) will have a mental or physical shopping list when they plan to make a purchase. But how often do you stick to your shopping list? When I go to buy something on or off line, I invariably end up buying more stuff than I had intended to. 

Take a book shop. People may initially visit a shop on website with a book in mind. The retailer must make it simple for you to find & buy the book you want. However, smart marketers will also take the opportunity to suggest additional items that might interest the buyer. 

Amazon do this particularly well with a great combination of news, best sellers, suggestions, treats, wish lists, emails etc. In physical stores, companies use window displays, special offers, in-store merchandising, tastings / demos etc. 

I visited my local Waterstone's recently and saw the display above. It was called The Writer's Table and featured 'Books selected by Philip Pullman that have inspired and shaped his writing'. It was an interesting combination of books and I'm sure they sold some titles that would not otherwise have been seen.

How could you apply this example to your business? How could you present products or services in an unusual or interesting way that grabs peoples attention? 

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

UK Internet Users Are Just Like Us

From the launch of the internet, UK users tended to be younger, more up-market and male biased than the whole population. However, research company BMRB latest research shows that the UK's 31.6M internet users now more closely reflect the UK's demographic profile.

They are 52% male and 21% are 25-34. Interestingly over 50's now represent over 30% of total time spent online. 

Over 27M internet users have a broadband connection & nearly 13M use a wireless connection at home. 

From a social media perspective, 5.6M GB adults view blogs once a month or more & 1.8M adults have ever used a podcasting service. 12.2M internet users agree with the statement 'I value the opportunity to add my own content / views to a website.'

So are you using web marketing to attract and keep valuable customers?

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

UK Web Ad Spend Up 21% Jan - Jun 2008

The Internet Advertising Bureau has just announced that UK online ad spend increased by 21% in the first half of 2008 and was worth £1.7bn. Over the same period, advertising spend on TV, press, outdoor posters & radio reduced.

Paid search e.g. Google PPC increased by 28% and accounted for just under £1bn.

Although internet advertising is not immune from the credit crunch I expect it still to out perform conventional marketing in the second half of 2008. For more background on why this is happening take a look at my blog Why is UK internet marketing spend continuing to grow despite all other marketing budgets being cut?  

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

Can you grow your business without marketing to new clients?

Most businesses focus on attracting and converting new clients. This make sense if you have a new business or don't have many customers. However, I am always amazed how little marketing is targeted at existing customers.

Using a simple example, if a business had 2,000 customers who spend on average £100 pa, then the annual turnover would be £200,000. If the business wanted to achieve a 20% increase in turnover:-

• it could attract 400 new customers (assuming no loss of existing customers) who also spend £100 pa. There would be a marketing cost required to achieve these 500 sales.
  
• Alternatively, the business could develop a marketing programme for existing customers that increases their average annual spend from £100 to £120 pa.

There is a higher chance of selling to an existing customer than a new customer

Depending on the individual circumstances of the business, typically the probability of selling something to a prospect is 1-20%. In comparison, the probability of selling something to an existing customer is much higher at 20-70%.

Both marketing strategies would require a marketing investment. Typically, the cost to communicate with an existing customer is often much lower (especially with email marketing) than communicating with a prospect.

So if you combine the probability of success with the lower cost of communication (e.g. using smart email marketing strategies) then you can understand why I am amazed so many companies focus on attracting new customers at the expense of growing the customer lifetime value of existing customers.

In the real world, even the best run businesses will lose some customers each year, so there is clearly a minimum need to 'top these up' with new customers.

The dangers of an excessive focus on new customers

However, if companies fail to get the balance right between attracting new customers and growing customer lifetime value, then it is likely that companies will see high customer turnover, high marketing costs and low customer loyalty.

Having a smart marketing programme to grow Customer Lifetime Value should help reduce customer turnover, reduce marketing costs and grow customer loyalty with the overall effect of improving Marketing ROI.

More on Marketing ROI 

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

Does your web marketing get the credit it deserves?

When times are tough, there is clearly a greater need to ensure that all marketing activities deliver the best Marketing Return On Investment. (Marketing ROI) which is simply about getting the most for your money or making every £ count.

This is easy to say, hard to do and challenging to measure. What was the uplift in sales (or value) achieved by that directory ad, direct marketing campaign or Google Pay Per Click campaign?

Web marketing is more accountable

One of the advantages of web marketing is that it can be much more accountable than traditional media. With my e-commerce clients I am able to allocate sales by source and even by keyword. e.g. Keyword X delivered 20% of sales with an average cost per click of 50p and an average revenue per click of £1.50. 

This analysis of key web metrics help guides my clients' future web marketing investment strategies.

Do web metrics always tell the full story?

However, despite the excellent web metric data available does it always tell the whole story? One of my new retail clients achieved over £60,000 sales through the online shopping basket in the first month that our new web strategy and e-commerce store went live. We were delighted, as previously their online sales were zero!

However, their total sales had increased by over £110,000 in the month so with the website accounting for £60,000, what had generated the extra £50,000 sales? The new web marketing strategy was the only thing that had changed. 

Analysis identified that the additional £50,000 of sales had come from telephone sales and 'bricks and mortar' stores. Further investigation identified that these extra telephone and store sales had been made by people who had first visited the website but wanted to either talk to someone on the phone or try the productin the store before making a purchase with a value of £400 - £1,000.

So just allocating the sales by channel would have given a false view of performance with the web marketing not getting the credit it deserves. By digging a little deeper and adding smart tracking techniques provided additional insight and a more robust view of Marketing ROI.

Key learning for companies big or small

• Use web metrics to analyse your key performance indicators on a regular basis 
• Tools like Google Analytics are great but with hundreds of data points (thousands when evaluated by different segments) it can be hard to see the wood for the trees. Having a piano does not necessarily make you a concert pianist. Consider what it would be worth to your business to get a 5% or 20% or 50% improvement in web performance? If you can't see the wood for the trees, it's worth choosing a web analytics expert 
• If you have more than 1 marketing channel and/or more than 1 sale channel, incorporate techniques to help identify the source of the sale. e.g. if you have telephone and web sales channels use a different telephone number on your website to isolate web generated calls / sales
• Include a 'obscure' link on every web page and get your telephone sales people to ask 'web callers' to click the link (to a telephone sales thank you page) which will aid web metrics tracking

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

European Online Advertising Spend Continues To Grow

Despite the credit crunch, 81% of advertisers have claimed that they have allocated more budget to online in 2008 & will continue to do so in 2009 & 2010, according to new research from the European Interactive Advertising Association. 

Much of this 'extra' money is being switched from press, TV & direct marketing budgets. In particular, 77% of respondents found that online advertising had a positive impact on their brand and 68% said it improved brand awareness. 

For more insight on why this is happening, take a look at my blog Why is UK Internet Marketing Spend Continuing To Grow Despite All Other Marketing Budgets Being Cut?

More than ever, businesses are focussing on Marketing ROI and want to get the best results for every £ spent.

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

James Villa email marketing grabs my attention

With so many emails arriving each day, email marketers are finding it increasingly challenging to achieve standout. 

Emails that I have opted in to receive (such as James Villa Holidays) have a much higher chance of being glanced at, but not always opened or read.

Their latest email jumped out of my preview pane and grabbed my attention, demanding to be read. Given the poor UK summer this year, the beautiful blue sky & sea view compared favourably to the grey sky I can currently see from my office window.

The headline also does a good job of communicating the overall message. 'Your perfect villa', implies both quality and personalisation. The use of 'secure' & 'now' provide urgency and a call to action. Further down, the email provides key benefits, an early booking offer and key links to prompt action.

If they used a similar email marketing system to the one I use for my clients, they would be able to track individuals that click specific links and follow up with appropriate actions to improves sales conversion and maximise marketing ROI.

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

Google, serendipity and marketing that money can't buy

I received a call today from a journalist from BBC Radio Wiltshire asking if I was available to participate in a programme about the European coffee culture. He had found me using Google. In Meet Peter Hawtin on my web marketing website, I mentioned that many years ago (before I became a marketer), I was trained as a coffee taster and had worked in coffee research.

I declined the offer as too many years had passed since I was actively involved in coffee and I didn't believe that it would serve the best interests of the audience for me to pontificate based on my experience from over 20 years ago. However, we then talked about marketing and in particular my specialist area of web marketing which hopefully might lead to opportunities to speak with passion in the future.

Key learning:-

• although 'coffee taster' is not a keyword I am promoting on my web marketing website as part of my web marketing strategy, Google picked it up and gave me a high ranking which led to interest from the BBC. Although it is important to focus most of your effort in enhancing keywords critical to your business, it is helpful to include some other information about you which may be serendipitous. In addition to coffee tasting, I mention (on my website) that I learned to ride a motorbike aged 4 and started racing aged 10. Clients and prospects often notice this and ask me about it and it gives them another dimension of who I am.

• getting exposure from a world class organisation like the BBC would be brilliant and it is something that money couldn't buy but it's important to understand that they are not there to promote your brand. They are there to inform and entertain their audience and therefore your contribution needs to help them achieve this if you want to be asked back a 2nd time. 'Winging it' would be a high risk strategy and could do more harm than good. 

• ideally, speak with passion about a subject you are expert in. Approach it from the audiences perspective not yours. What would they find helpful, informative and entertaining? 

By the way, if anyone out there is an expert on European coffee culture, please send me an email & I will put you in touch with BBC Radio Wiltshire.

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

Canon hit the mark with their email newsletters

I have a Canon camera and signed up for their newsletter a while ago. Unlike most consumer products newsletters, Canon's is focused on helping you get the best results from your camera. 

Each issue includes great photos from customers using top of the range SLRs as well as budget priced compacts. You can view a photo gallery each month and vote on which photos you like best. Alternatively, you can download a high res version and even order a high quality printed sample using the Canon printer of your choice. Presumably you will be so knocked out by the print quality you will order a new printer.

It also includes a 'How Do They Do That?' section where the photographer explains how they produced such a stunning photograph. The email also includes features, news and a competition.

Unlike most emails, it grabbed my attention and compelled me to look at the content. When I am next thinking of changing my camera or printer, Canon will be on my shortlist and each month it sends me a gentle reminder of 'You Can with Canon'. 

This email works for prospects by showing what they could achieve with a Canon camera. It also works for customers by making them feel part of the Canon club and improving their brand affinity.

This is one of the emails that I look forward to receiving each month and is a good example of how email marketing can help make a smart sell.

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

Is it worth paying more to be number 1 on Google PPC?

For many companies, using Google Pay Per Click is a good strategy to attract target prospects. It is important to be on the 1st page of Google as typically only around 1/3 of people using search will look beyond the first page and fewer than 1 in 6 will go beyond page 2. 

Higher ad positions achieve better conversion rates

According to Google, having an ad position of 2 (2nd from top) will have a conversion rate of around half the ad in the top position. 

With my PPC experience I would agree that the higher the ad position the better but there are exceptions for individual brands / ads. The data below (from one of my PPC clients) shows the improved performance the higher the ad is shown, compared with ad position 8. When the ad was shown in:-

• ad position 1, it attracted 90 times as many visitors
• ad position 2, it attracted 30 times as many visitors
  
• ad position 3, it attracted 20 times as many visitors
  
• ad position 5, it attracted 10 times as many visitors
• ad position 7, it attracted   5 times as many visitors
  

So the obvious start point is to aim for the highest ad position. However, the actual ad position achieved will depend on your maximum Cost Per Click bid and your Google Quality Score. The quality score will depend on a range of factors including your account history, the landing page and ad text.

Can you afford to bid for the number 1 position?

In the above example, let's suppose that when the maximum Cost per Click bid is £1 you achieve an average position of 3. Moving to position 1 will provide 4.5 times more traffic. The extra amount you will need to bid to achieve an average position of 1 or 2 (all other things being equal) will depend on the competition for that keyword. It might be that you only need to bid a few pence more. Alternatively it could be £3 or £10.

The right strategy will depend on how well your site converts these visitors to customers and the value of a profitable customer. The best way to approach this is to:-

1. calculate the value (not revenue) of a target customer e.g. £100
   
2. identify the customer Conversion Rate e.g. 1% of visitors
3. calculate maximum Cost Per Click bid price = Avg Customer Value / Conversion Rate (in this example £1)

So in this example, £1 maximum bid price would provide an ad position of 3rd from the top. Although, higher bid prices would attract significantly more website visits, the higher cost of achieving the extra visits would exceed the value / profit of the extra visits. i.e. There is no point paying £150 to get a customer worth £100.

So is it worth paying more to be number 1 on Google PPC? 

Sometimes the answer will be yes but it will depend on analysing the various factors outlined above and calculating the maximum bid price based on the value of your customer. 

Read more on Marketing ROI

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

Do you want your brand to appeal to everyone?

One of the first questions I always ask my new prospects or new clients is 'Tell me about your target audience?' The answer is usually illuminating. More often than not, companies (big and small) want to appeal to everyone. 

A typical answer is 'Everyone has a sofa / fridge / mobile phone / needs a car loan / watches TV / buys CDs (or add your own product or service to the list) therefore my target audience is everyone. Although everyone may have a sofa at home, for some people, Argos will be there 1st choice retailer. For some others it will be John Lewis. There are very few people who will equally consider shopping for a sofa at John Lewis and Argos for the same product. Each person's preference will be based on a range of criteria including quality, range, price, location, experience and crucially, their mindset. 

It's understandable why companies think this way but it's based on the mistaken belief that appealing to more people will naturally grow your market size and increase sales.  In my experience, brands that try to appeal to everyone usually end up appealing to no-one. 

Here are some of the UK's biggest brands. Even they do not have universal appeal:-

• ITV (the UK's largest commercial channel) has an audience share of less than 18%
• HP (global number 1) has a 18% share of the global PC market
• 38% of adults shop at Tesco

The above brands have been around a long time, they have huge resources and huge marketing budgets, yet still do not appeal to everyone. What chance is there that your brand will appeal to everyone? 

So don't make the mistake of trying to appeal to everyone. It can't be done. Instead, identify a valuable target audience with a common problem that you can solve profitably. Then develop a compelling brand thought that communicates your solution more powerfully than your competitors. 

If you have a clear idea of who is your valuable target audience, you will know which target prospects that you want to attract to your website. 

If you have clearly identified your target prospects problem, it should be possible to develop a strong solution and a compelling, distinctive brand thought that is likely to have the greatest appeal to your target prospects.

By communicating this brand thought effectively across your website and web marketing you will have significantly increased the probability that you will convert web visitors to valuable customers. It will also help when developing strategies designed to grow customer lifetime value. 

For me it is a no brainer: it is always better to strongly appeal to a segment of valuable prospects / customers than have low appeal to a much larger audience.

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

Can you afford not to analyse your website performance?

I passionately believe that having an effective website can play a crucial role in attracting and keeping valuable customers. Yet, based on over 12 years web marketing experience I suspect that 95% of UK business websites fail to perform well.

One key reason is that so few companies use a web metrics specialist to analyse which parts of their web marketing are working and which are not. 

Having goals for the website is an essential pre-requisite for success. Once the goals have been defined it is possible to evaluate how well different aspects of the web marketing and website perform in attracting and converting target prospects to valuable customers. 

However, many companies I meet do not have sufficient (or often any) resource allocated to analysing website metrics or performance. The reasons vary but sometimes it's because:-

• they don't know how to do it 
• they have tried to use Google Analytics but can't see the wood for the trees
• they don't have the time
• they can't afford it

Can you afford not to?

Consider an example of a company that sells a product for £40. If their marketing cost per visit is 50p and they have 10,000 visits then their total marketing cost is £5,000.

If they covert 3% of visitors they will make 300 sales @ £40 = £12,000 revenue. If their product profit margin is 50% their product costs are £6,000.  With the marketing cost above of £5,000, this gives a profit of £1,000 and a marketing ROI of 20%.

However, consider if the analysis of web metrics leads to a number of improvements that increase conversion from 3% to 4%. The sales revenue would increase to £16,000 (10,000 *4% * £40). The 50% product profit margin means their product costs are £8,000.  With the marketing cost remaining the same at £5,000, profit has increased from £1,000 to £3,000.

So an improvement in conversion of just 1%  triples profit and triples Marketing ROI from 20% to 60%.

So can you afford not to analyse your website performance?

Read more on Web Marketing ROI

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

Why is UK internet marketing spend continuing to grow despite all other marketing budgets being cut?

The decline of traditional media

The latest quarterly survey of UK marketing spend by the IPA reveals that marketing 'budgets have been revised down for the third successive quarter.

As confidence reduces, some companies view their marketing budget as a 'discretionary' spend and make cuts. Many bigger brands are cutting budgets for TV, press, outdoor, radio & cinema advertising as well as PR, events and research.

Direct marketing and sales promotion have traditionally been more resilient to downturns because they are seen as providing a 'stronger relationship' between spend and return. 

However, even these 2 sectors are seeing budget cuts.

The continued growth of the internet

Internet marketing is the one sector that continues to grow. The Guardian reports that 30% of advertisers said that they were increasing their marketing budgets. Over 17% of companies said that they now allocate more than 10% of their budget to internet marketing. As few as 11% of companies have zero internet marketing budgets.

Why is the internet the exception?

The IPA represents advertising, media & marketing communications agencies who tend to be the bigger agencies with the bigger clients. Many of these companies have a long heritage of spending large budgets on big brand campaigns using traditional media like TV. Many have been slow to switch money to the internet. However, as budgets become under pressure there is a pressing need to make the marketing budget work harder and become more accountable. Internet marketing can provide many advantages:-

• improved targeting - with SEO & Pay Per Click (PPC) advertising you can reach people actively searching for your product or service

• lower costs - email marketing, blogs & PPC are much lower cost than traditional media

• improved cost efficiency - with traditional advertising you often pay to reach an audience (e.g. readers of a magazine) whether or not they have read or can recall your ad. With PPC you only pay when prospects react i.e. they click to visit your website

• greater control - it is much easier and faster to increase or decrease spend with PPC and email marketing

• improved measurement - advanced email systems, PPC and web analytics make it possible to speedily identify what's working and what isn't and make appropriate changes faster and more often

• more tests - advanced email systems, PPC &  web optimisers enable multiple tests to be implemented with instant results e.g. testing multiple propositions, headlines, copy, images, calls to action etc

• greater accountability - when budgets are under pressure it is even more critical that the marketing budget is being spent as effectively as possible. The above advantages all help provide greater accountability.

What does this mean for smaller companies?

As most smaller businesses do not have a legacy of spending large budgets on TV, press etc I would expect them to spend a significantly larger share on internet marketing than bigger brands. 

Often smaller companies will not have any in-house expert marketing support. They naturally will want to get the best results from their budget with minimum resource, waste and risk. 

The internet has huge potential to help businesses (big and small) to improve their business by attracting new prospects; converting them to valuable customers: and growing customer lifetime value. However to fully realise this potential (and avoid having one of the many websites that fails to perform) make sure sure you either have the right web expertise in-house or find a web marketing expert.

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.

How can web marketing help you keep your best customers?

Most people focus all their efforts on attracting new customers and hardly any effort on keeping and growing valuable customers. In a difficult economy you cannot afford to lose valuable customers.

Who are your best customers?

First of all I am assuming that you have a definition for a best customer. The definition will depend on your business situation and the data you have access to. Is it a customer who has:-

• been with you longest?
• spent the most with you this year / or ever?
• generated the most value (profit contribution) for you this year / or ever?

Where the data exists, then using value or profit contribution is best because two customers that generate the same sales revenue might have significantly different costs to serve.

It gets harder with more customers

If you have 2 or 5 or 25 customers you could keep track of which customers are continuing to buy from you and whether they are happy in your head. It's harder when you have 50 or 5,000 or 5 million, especially if they are more remote e.g. telephone sales or online sales.

You need a CLTV marketing strategy

Customer lifetime value marketing is a process to help companies grow the value of their business. Its about getting more customers to:-

• spend more per transaction
• spend more frequently
• for longer (i.e. to increase the customer lifetime)

It is not rocket science but it does require detailed analysis of your customers and marketing strategy to identify the best solution for your business.

Different analytical techniques can be used to identify the historical value of your customers. It is also critical to identify the future value of customers and this is what most companies find most challenging.  

It works for smaller companies too

A small number of Britain's best brands have used these techniques to successfully grow customer lifetime value. And the good news is that these techniques can also work for small and mid sized companies.

What's exciting is that 5 or so years ago these techniques were often too difficult and prohibitively expensive for smaller companies. However, the growth of new systems, the internet and email marketing have smashed many of the barriers.

How does it work?

A scoring system is developed that scores customers based on their past and future value. This scoring can occur weekly /  monthly / quarterly depending on the business needs. e.g. customers could be placed into 1 of 25 different value segments.

Rather than treating everyone the same, a specific marketing strategy is developed for each value segment based on its likelihood to maximise customer lifetime value. It could be that for one value segment the strategy is to telephone them today. For another value segment, it might be to send a personalised email with a specific message or offer.

The performance of each strategy is measured and refined based on the results.

Once the strategy has been developed it is possible to automate this where at the 'press of a button' your customer database is scored, placed into different segments with every segment getting a personalised email with a specific offer most relevant for them. Done well, this should help grow the value of your business and ensure that you keep your best customers and better still have more of them.

If you don't have the expertise do this it's worth talking to a web marketing expert.

Remember...web marketing is about solving customers' problems profitably.

Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.