Determine your most valuable customers: Customer Lifetime Value, inferred from analytics, spots the best profits segments

Customer segmentation starts with your web analytics solution

Avinash Kaushik has always been a great evangelist for the Google Analytics solution, with useful tips at the Occam’s Razor blog, along with having written two books on the business of web analytics (see the Small Business Trends’ book review on his book Web Analytics 2.0). There are great examples of how to extract value from analytics data. This post on customer lifetime value shows the influence of analytics data to determine your most profitable customer segment.

Explained by David Hughes of E-mail academy , the concept answers three questions regarding the value of an acquired customer base:

• Did you pay enough to acquire customers from each marketing channel?
• Did you acquire the best kind of customers?
• How much could you spend on keeping them sweet with email and social media?

This concept, along with inference of the analytics data, can guide businesses to understand which segments of website traffic are worth the marketing effort.  Remember, your analytics data is more than just examining keywords.  You can examine your online presence, and infer some answers, as well as guidance for others.  I love this post from Avinash because it gets into the meat and potatoes of value.  This is not entirely new; Annastatia Holdren  gave great comments during her Adwords training about monitoring the value of your keywords so that you are not paying more for traffic (you can read more on the value of clicks here)

Key takeaways relevant for business owners looking to review their analytics.

• Focus on discovering the actions of a segment, not just an individual – analytics is about understanding a group of given traffic.
• Being at the top of a given SERP may be costly in some instances.  There are many ways to drive customers to your site without going head to head on a keyword which may be expensive to use in an Adword or CPC campaign.  That expense becomes particularly costly if there are few visitors converting from use of that keyword.
• Even if your business attempt to gain a SERP advantage via a focus on keywords, an overfocus on certain keywords can eliminate choices of other keywords and phrase which has lower traffic volume but potentially better odds of conversion – more sales, more sign ups, etc.
• Business owners should be open for other means for customers to discover their site — even a well constructed print ad that links to a great landing page can general the right traffic if the ad is exposed to the right audience.  Foursquare, Twitter, Yelp, and social networking sites have provided new means of discovery.

To read the full explanation of the Customer Lifetime Value process, see the post at Occam’s Razor.