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Web Site Measurement Hacks by Eric T. Peterson

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Hack #86. Manage Lifetime Value Using the Visitor Segment Value Matrix

Combine the measurements of current value and potential value to refine your business's customer marketing and retention strategy.

What happens if you look at both the current and potential value of visitor or customer segments at the same time? You get the four groups shown in Figure 6-5.

Visitor segment value matrix (courtesy of Jim Novo)

Figure 6-5. Visitor segment value matrix (courtesy of Jim Novo)

How do you create your own visitor segment value matrix? Easy:

  1. Take your customer segments and rank them by potential value (recency or latency [Hack #85] ), and then split them into two groups: above average and below average.

  2. Take all of these potential value groups and rank them by current value (frequency or lifetime value [Hack #84] ), then split them into two groups: above average and below average.

    You will end up with the four classifications above, each containing unique visitor segments.

  3. Do an analysis like this every month so you can compare the results with your financial statements.

Consider how powerful it would be to know the ranking of visitor segments based on this model. The segments in the upper-right box are the rocket fuel of the company. They are the 10 percent of the segments that create 90 percent of the profits—now, and in the future. This is where you should focus customer retention efforts [Hack #52] . The segments in the lower-left box are ...

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