The purpose of customer operation is to maximize the customer lifetime value. Therefore, merchants need to conduct quantitative evaluation of customer value to judge the effect of customer operation activities and test the quality of acquiring new customers through various channels.
1. Customer life cycle
Customer life cycle generally does not refer to the cycle of a single customer, but to the life cycle of a group of customers, so the customer life cycle is a group value.
Customer life cycle = (i1 + i2 + i3 + .. · + in) / number of customers
In the formula, i represents the life cycle of a single customer. Generally speaking, the user object to be valued must be within a complete life cycle, and the number of days they consume from the first day to the last day must be calculated and the average value is taken.
2. Customer life cycle profit
The net profit brought to the merchant by the customer in the life cycle is equal to the total profit brought to the merchant by the customer minus the cost invested by the merchant in the customer.
Customer life cycle profit = total revenue – total investment cost
Total revenue is the sales contributed by the customer. Costs include customer acquisition costs, marketing costs, and sales costs. For example, customer group A brings in a total of 5 million yuan in sales during its life cycle, with a product sales cost of 800,000 yuan, a customer group A acquisition cost of 500,000 yuan, and a marketing cost of 300,000 yuan. Then the life cycle profit of customer group A is 300-800,000-500,000-300,000 yuan.
3. Customer Acquisition Cost
Customer Acquisition Cost (CAC) is the cost for a merchant to acquire a single customer.
CAC=Total Cost/Number of New Customers
For example, if we spend 10,000 yuan to acquire 50 customers through P4P, then the cost of acquiring a single customer is 200 yuan. It should also be noted that the CAC here is an average. When doing marketing promotion, many merchants may use multiple customer acquisition channels, and the CAC of each channel is different, which can be calculated separately for optimization. In addition, the definition of customer acquisition is also different.
4. Customer Lifetime Value Customer Lifetime Value (CLV) is the sum of the contributions made by customers to the business during their customer life cycle. In essence, it is the net present value of the total profit of the products purchased by customers during their customer life cycle.