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It's Customer Valuation, not Attribution

Alexander Lau

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Feb 11, 2015
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Marketing attribution has been a hot topic for several years now, especially with the increasing availability of technology and metrics that can show marketers almost every step in a customer’s journey. Greater and deeper visibility into these touchpoints has led to the proliferation of attribution — last touch, first touch, multi-touch. Despite the effort to quantify every activity, the picture is still incomplete.

Current multi-touch attribution schemes only credit each channel or activity with a fraction of a transaction or acquisition. They don’t consider whether those events would have happened without any intervention whatsoever. And they don’t show whether the touchpoint had a positive impact, negative impact, or none at all. The future of marketing lies in customer valuation — understanding how much incremental value marketers create at each step in the customer’s lifecycle.

Before you can measure changes in value you have to have a baseline. So, the first step in customer valuation is understanding and correctly measuring Customer Lifetime Value (CLV). CLV is the present value of all spend, from the first transaction until the customer churns from the brand, including transactions predicted to happen in the future. The goal of customer valuation should be to maximize CLV with each and every marketing activity.

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I find this interesting on many levels. Not only is he right about the picture being incomplete within attribution (sorry current attribution groups), but the author of the article is a former investor (Goldman Sachs, 3G Capital, and Highbridge Capital). IOW, VC groups are going to be hesitant to support attribution groups without knowing they take the CLV metric into consideration and that's not very easy to calculate.
 
It's funny how these new concepts are so old.

The last article I wrote for the blog mentioned a week-long training for the new sales herd. I clearly recall talking about and calculating a customer's lifetime value. That was 1996...

The old ADP CRM -- the one that started life as Automotive Directions out of Madison -- did a nice job of calculating current value, and with just a little spreadsheet wizardry, it was easy to project a Lifetime value.

As far as red herring, er, um... I mean, attribution. The attracting premise/fantasy of what we now call "digital marketing"
-- which we simply called the Internet in the late 90's -- is that we'd be able to "see" and understand what was happening, make more informed decisions, yada yada yada. Interest in attribution ebbs and flows -- it seems to peak every 5 years or so when some bored product manager runs out of ideas and starts looking through old backlogs and tries to apply some new technology. Really, they just change the terminology... market a new product, and their customers are still as confused as ever.

So TV wins :) LOL
 
Well exactly, I was going to include shout outs to the veterans here like @john.quinn @joe.pistell and @ed.brooks and say.... although attribution looks flashy you were all right. It's about the customer. @john.quinn that's pretty funny you could calculate it with ADP CRM. Did most CRMs get away from this or is it in place? I don't buy that 3rd parties are pulling that to calculate on behalf of dealer.
 
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That's pretty funny you could calculate it with ADP CRM. Did most CRMs get away from this or is it in place?

My recollection is a lot of CRM's had some way of adding-up a customer's total spend, and then most then had some type of customer ranking or status component.

And I must be getting old, because I can't remember what they called it, but ADP CRM had this AWESOME build-your-own-spreadsheet feature where you could take almost every data point from the DMS + CRM and really go wild. With a little imagination, users could do crazy things.

It was my favorite feature... I often joked that I invented my own reports to show how well I was doing :rofl:
 
Back when I was selling for Big Red 11 plus years ago. The DMS would tell you ltv of a client.
I used to tell my clients to check the number of name files at the beginning and end of each month. This would give you an accurate number of conquest sales. This worked as long as you were marking service only customers inside the DMS. The goal was for the dealer to understand where to apply resources. That goal still exists today. Resources could be time, training, advertising, software.
 
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Just surprised that we don't talk more of it. I presume specific systems could be built / marketed.

https://perq.com/calculate-customer-lifetime-value/

Many consumers return to the same dealership again and again for their car purchases. Sometimes it’s because it’s the only dealership selling a particular manufacturer or make in an area. But more often than not it’s because the customer feels a strong sense of loyalty to the dealership. Perhaps they even see the same salesperson every time they go in to look at vehicles. At Right On Interactive, we call that engagement. Over time, engagement builds relationships and relationships build revenue. Car dealers are historically great at making and maintaining relationships, so CLV is a metric that is not only calculable but critical to the long-term success of the dealership.
 
Reynolds had Customer Value on the customer inquiry screen, which totaled profit from all departments. Not sure at that point if you need any fancy algorithms to tell you that if a guy was already worth ten grand to you, you best be kissing his ass if you want to keep future profits on the table. I think Vendors need to get back to basics in a lot of ways. If i hear the term "proprietary algorithm" in any pitch it makes me instantly 10 x more skeptical about their claims.
 
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