Business Analytics for Sales and Marketing Managers: How to Compete in the Information Age

FINDING THE MOST VALUABLE TARGET GROUP

This section was written for processes owners who want to optimize existing acquisition activities and who have DW information about which customers historically were acquired through which campaigns. The aim of this section is to show how you can identify which campaigns are the most valuable for your company from a return on investment (ROI) perspective.

We do not explain how to profile customer groups until the next section, but it is a logical next step. We separate profiling into an independent section because the methodology used for profiling has no resemblance to value estimation. Also, profiling often is done as a stand-alone exercise. These two analytical approaches do, however, supplement each other well.

When you are executing acquisition activities, obviously you do not know the value of the customers you will get out of the campaign. If you can identify customer segments similar to the ones that you expect to acquire, since it is a relaunch of a campaign, you will be able to estimate the “customer lifetime value” of the potential new customers. You can estimate the lifetime value of a customer or a group of customers by using the formula that was presented in the whale model in Chapter 2:

The three elements of the formula are:

1. Expected acquisition costs. They can be estimated as the total campaign costs divided by the number ...