Marketing 2.0

Customer lifetime value

Over on Seth Godin's blog there's a good post on customer acquisition cost and lifetime value. The Internet makes it much cheaper to acquire customers. Meanwhile, customer lifetime value can also be small if companies like Facebook or Twitter spend virtually nothing to get you there in the first place. The payoff can come later when the company figures out how to monetize the traffic.

Seth's Blog: Lifetime value of a customer/cost per customer.

Social coupons heating up

Everyone is jumping into the group coupon, daily deal game these days. Fast Company reports on Facebook launching Facebook Deals. If they can leverage and mobilize just a fraction of their 600 million members they will be a force in this market. Meanwhile, guest columnist Romil Patel reports on his first-hand experience with both Groupon and Living Social on the CNN Money site. He doesn't sound that positive about Groupon but Living Social did a better job with customer service.

The key question is whether these strategies really benefit the merchants. The answer is it depends. One-time customers who get a 50% off deal and don't return are not benefitting your business. If regular customers  buy the coupons, then it could reinforce loyalty. But any merchant with a decent customer database should know his regular customers and offer them selective promotional offers. Why split the revenue with Groupon?

For new businesses trying to get established by attracting customers, it could be a useful strategy. The key is to follow up with the customer list supplied by Living Social (apparently Groupon has problems with this) and attract these shoppers back.

The mania over daily deals ignores one of the most fundamental and profitable resources — the loyal, repeat customer. Merchants would be better off, in most cases, to focus on customer lifetime value rather than churning through bottom feeders and extreme couponers. These customers will never add value over the long term because they are loyal only to the next merchant who offers a two-for-one deal.