Top Customer Analysis - You Probably Are Doing It Wrong

When marketing professionals think about their best customers, they often do the same boring analysis. They pull a list of their customers who have spent the most over some time period and call the folks at the top of the list their best customers. They then look at the demographics and a few other traits of those customers and declare victory. However, especially in an online world, this misses a lot of really interesting insights. If you stop with your analysis at this point, you are only about 5% done.

A natural extension of the analysis mentioned above is to factor in customer acquisition costs (CAC) and marketing source. You already calculated how much the customers spent - extend that to calculate Lifetime Value (LTV) of those customers. (You will need to know your churn to compute LTV.) If you have the analytical tools to pull the CAC for these top spenders, you can generate a ratio of LTV to CAC and segment the data by marketing source. What marketing sources have the best LTV to CAC ratio for these top spenders? What does that tell you about marketing activities that were really effective at generating top customers?

The next step is to broaden the analysis beyond just the top spenders. Look at LTV to CAC for all customers acquired by marketing segment. Which marketing segments are most effective using this lens? Until now, the analysis has assumed no virality. But most products, especially online properties, have at least some virality built into them. If you haven't looked at virality before, here is a great primer by David Skok.

Now instead of just tallying up your best customers in terms of spend, look at those customers who shared your product the most. Better yet, see if you can link those shares back to actual new customers acquired. If you can, keeping going - you aren't done yet! Look at those downstream customers acquired by the sharing and see how much they spent. Let's take those dollars and attribute them back to the customers who did the sharing. In other words, we are going to look at which customers spent the most AND how much money you got from their sharing activity. Once again take those top customers and compare the value they brought you to their CAC and segment the data by marketing program.

Whew! If those analyses seem fairly complex, you are right. These are going to take you a while. Even with the best of tools and people, this isn't going to be a quick process. However, if you can complete these analyses, you will likely have a totally new perspective on where you should be focusing your marketing efforts.