Until recently, calculating a customer’s lifetime value, typically defined as the direct contribution a customer makes over a period of time toward a company’s profitability, has been just that…direct. But with social media, what about the impact of indirect customers, the ones that aren’t spending a whole lot on your company but are engaged socially on Facebook or consumer review sites?
It raises an interesting paradigm for businesses to adjust to, and I think will be become one of the focal points of CRM initiatives moving forward. The problem is measuring expense vs. revenue, profit, and customer behavior is straightforward and easy. But common sense says measuring the ability of to generate indirect profit through word-of-mouth, new-customer referrals is much more difficult. The acquisition cost in this case is zero, and perhaps worse, not even measured because by the company
It’s important because when it comes to resource allocation, I believe many companies are beginning to fly blind when it comes to their Web 2.0 marketing and branding initiatives. Net Promoter Scores, which typically correlates a customers’ willingness to refer a company, are becoming a popular metric, but there’s a big difference between a willingness to refer and an actual referral.
Understanding the social customer’s true value adds disparities to these measurements, as many studies have found that a customer’s intent to refer and profitability aren’t strongly linked. I expect we’ll see a new generation of metrics, similar to Net Promoter, but those that reflect the social customer’s true value, values that place a greater emphasis on the real value of a customer – and not simply future purchasing behavior.