Customer Lifetime-Value Equation
Most catalogers using LTV look to recover their investments in acquiring a customer within the first year; others use six months—even 18 or 24 months. Your time frame should depend on your financial structure and results. Normally, we look for a maximum 12-month payback period when investing in new buyers, but this will vary depending on the LTV and your financial situation.
In practice, LTV can be applied to your customer file as an average, but since there really is no average customer, it’s best applied at either the list/segment level, individual customer level or both.
Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in circulation planning, forecasting and analysis. He can be reached at (317) 844-8228 or through the Web site: www.lettdirect.com. Susan DeVito works for Lett Direct and specializes in lifetime value analysis. She can be reached at (207) 839-3382.
Steve Lett graduated from Indiana University in 1970 and immediately began his 50-year career in Direct Marketing; mainly catalogs.
Steve spent the first 25 years of his career in executive level positions at both consumer and business-to-business companies. The next 25 years have been with Lett Direct, Inc., the company Steve founded in early 1995. Lett Direct, Inc., is a catalog and internet consulting firm specializing in circulation planning, plan execution, analysis and digital marketing (Google Premier Partner).
Steve has served on the Ethics Committee of the Direct Marketing Association (DMA) and on a number of company boards, both public and private. He served on the Board of the ACMA. He has been the subject of two Harvard Business School case studies. He is the author of a book, Strategic Catalog Marketing. Steve is a past Chairman of both the Catalog Council and Business Mail Council of the DMA. He spent a few years teaching Direct Marketing at Indiana University in Bloomington, Indiana.
You can contact Steve at email@example.com.