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Measuring Business Viability Using Customer Lifetime Value

  |  October 30, 2015

 

As we approach the finish line of the development phase of appexpress.io – a rapid application development platform – I came to a realization:

One noticeable thing within organizations is the friction between the Marketing and Accounting departments. Sure, both want the business to prosper but in different methods. While accounting wants to preserve as much savings and avoid expenses, Sales and Marketing Department stubbornly tries to justify the expensive activities in order to acquire customers, make sales and ultimately realize profitability. This is where the concept of customer lifetime value comes in. This is when a business looks as far as five years into operations to realize whether a strategy or a campaign would be good based on how many customers they would be able to sustain.

The common practice is that a feasibility study needs to be submitted – this is the tool that will reconcile both departments: Accounting promises to provide funding on the condition that Marketing fulfills its promise to meet the targets and deliver. However, most businesses now are fast-paced and coming up with a feasibility study might take up time and the activity, in effect, might be executed a little too late… but what if there was a tool that can instantly generate a report that determines whether a marketing campaign or strategy or even a business plan would prove viable or otherwise? Hence this blog.

There are 2 main reasons why I am writing this blog:

  1. I want to share a bit of my technique on how I come up with quick but well-calculated recommendations for marketing campaigns
  2. This can be a tool that our users can utilize prior to building their online storefronts on appexpress.io

This is only version 1 (and was created by a non-developer) so it may still be rough around the edges but will verify if projected figures add up to form a viable business.

Prior to using this calculator, you will only need a few things:

  1. Your CPA (Cost Per Acquisition)
  2. How many leads you intend on getting for your campaign
  3. How much of those leads you expect to sign up
  4. How much you will spend per customer
  5. Your expected retention rates for the 2nd, 3rd, 4th and 5th years respectively
  6. Your monthly service/subscription fee
  7. How long the perceived customer lifetime is in your industry/business

Once you have all these details, you are free to use the tool as much as you want. In the coming weeks, we will be developing these tools and come up with more to help our customers enhance their web applications using AppExpress. Keep in touch – join our mailing list to stay updated with the latest tools or leave your comments and we would be happy to answer your queries.

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