Google Analytics can be easily considered one of the most comprehensive tools available for tracking the overall health of your websites. It is used to measure vital parameters about your website, including return on investment (ROI) on your advertisement expenditure and tracking the flow of traffic, videos, flash, and other social media applications running on your sites. Over the years, the popularity of Google Analytics has increased. Thanks to the accuracy and reliability of the tool, it enjoys a solid reputation among digital marketers and marketing managers.
What is Goals Feature in Google Analytics?
One of the reasons behind the popularity of Google Analytics is its Goals feature which allows users to track customer interactions on selected parameters. For example, if you want to measure your site’s performance on the dimension of “Subscribing Newsletter,” you can set this as your goal on Google Analytics. Once the settings are complete, you will know who all have subscribed to your newsletter from the data and information offered by Google Analytics in this regard.
Some of the other vital parameters you can select as a goal for your website include page visits, duration of visits, destination, and events. On all these dimensions, you can get insightful data from Google Analytics which can then be applied to increase traffic to your website.
What metric can’t Google Analytics track?
As mentioned above, there are a range of parameters that Google Analytics can track for your website. However, when it comes to tracking the Customer’s lifetime value, Google Analytics is unable to track the data. The primary reason behind the inability of Google Analytics to track the Customer’s lifetime value is the inherent nature of the information associated with this particular dimension.
Unlike the other performance measures, the Customer’s lifetime value is a complete performance metric. It is not a single number, but rather it signifies the total worth of the consumer during their lifetime association with the company. It is quite a complicated (and complex too) task to track the Customer’s lifetime value and then come out with the specific number denoting this popular metric. There is no software or tool available in the market today that can track the Customer’s lifetime value.
What is a Customer’s Lifetime Value?
Let us understand this concept of a Customer’s lifetime value in detail here, especially from the perspective of cost and profitability. Technically, a Customer’s lifetime value represents the average revenue that customers generate during the entire period of their relationship with the company.
The metric is essential not only from the perspective of the Customer’s value for the company but also from the total worth that consumers bring to the table. Marketing managers look at this metric with great interest as it helps them strategize more effectively to retain existing customers and drive growth by converting their existing lot of consumers into loyal ones.
A customer’s lifetime value is also essential to know the costs involved in acquiring new customers. Statistics show that making a new customer is at least five times costlier than retaining an old one. The importance of customer lifetime value couldn’t be overemphasized. By focusing on the needs of consumers with high lifetime value, an organization can save a lot of money that would have otherwise been required for new customer acquisition.
How to calculate Customer’s Lifetime Value?
To calculate the Customer’s lifetime value, we require the information on three different parameters: Average order value, average number of transactions per period, and customer retention period. For example, take a local coffee shop with an average sales of $10 from its three different locations in the city. The typical Customer for this Local Coffee shop is a working executive who visits the shop three times a week, 150 visits in a year, over an average of 10 years in the life cycle. Therefore, the lifetime value of the Customer can be calculated as below:
Customer’s Lifetime value = average sales X visits in a year X average years
= $10 X 150 X 10 = $15000
The customer’s lifetime value metric is often used in conjunction with another metric of customer acquisition cost. The cost of acquiring customers includes the expenditure organizations make on marketing, advertisement, special offers, and discounts.
So, if the Customer’s lifetime value of an average fashion retail customer is around $2000 and the cost of acquiring a customer exceeds $2000, then the fashion retail chain would be losing money. To reverse the situation, the retail chain has to either increase the Customer’s lifetime value or pare down the customer acquisition cost.
There is hardly any doubt about the utility of Google Analytics in offering valuable information to online businesses. Digital marketers can use the information to accomplish several tasks, including acquiring new customers, enhancing the interaction with existing consumers, and strengthening the overall profitability of the business.
Google Analytics offers information on a range of parameters. However, when it comes to a customer’s lifetime value, the tool can’t track the results and provide the desired details. Given the importance of value that retaining existing customers hold for the company, it is crucial for you as a digital marketer to accurately calculate customer lifetime value and then use it in tandem with other essential parameters offered by Google Analytics for getting optimum results.