What is Predictive Lifetime Value?
It’s a marketing tool that advancing rapidly thanks to the power of big data, but it’s also something that’s been around in one form or another for a pretty long time. Casino customer loyalty cards, for example, have long provided land-based casinos with a data stream that allows them to identify their biggest players and market to them accordingly.
On the web, where data flows like comp drinks at a packed craps table, predictive lifetime value is helping to take the guess work out of online marketing campaigns.
After all, spending a little more on targeted campaigns to acquire high value customers is much better than the shotgun approach most web marketers use.
Calculating Predictive Lifetime Value
PLV does not have a fixed meaning, and how detailed your analysis is will be based largely on how much data you can bring to the table. Obviously, bigger websites with more traffic are going to have more data to work with.
But that doesn’t mean smaller affiliates can’t take advantage of predictive lifetime value, too.
At its simplest, predictive lifetime value can be expressed as a mathematical formula: the amount of money a customer spends with you or your affiliates over a given time – the cost of customer acquisition (CPA). That number can give you a pretty good idea of who your value customers really are.
Once you’ve established who your own personal whales are, you can start developing a demographic snapshot of them so that you can market to similar customers. Some basic information you’ll be looking for might include:
- Country of origin
- Method of payment
- Preferred games
- Method of acquisition (this is a big one!)
- Cost-per-acquisition (CPA)
If you’ve got enough data, getting a handle on predictive lifetime value also helps identify the maturity curve of your average customer. Going deep into this territory may reveal trends about your longtime customers and players that will help you retain their business, while picking up new players along the way.
A Word of Warning
Any sports betting enthusiast will tell you that predicting the future is a tricky business, no matter how much data you’ve got at your fingertips. The same dynamic is in play with predictive lifetime value.
Relying too heavily on this data is a mistake. As Forbes.com writer Bruce Upbin observed recently, this information is, “…a tool, not a strategy.” As is always the case, providing your customers with a good value proposition is the best foundation for a marketing strategy.