Entrepreneur's Journal: eBay's site revamp and the lifetime value of customers

Posted Sep 23rd 2007 8:45AM by Tom Taulli
Filed under: Competitive Strategy, Google (GOOG), Yahoo! (YHOO), eBay (EBAY), Amazon.com (AMZN), Marketing and Advertising, Small Business

In a recent piece in BusinessWeek, there's an in-depth look at the revamp of eBay's (NASDAQ: EBAY) website. That is, the company is trying to bring back buyers – who have been moving to rivals like Google (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), and Yahoo! (NASDAQ: YHOO).

It's a smart move and I also think it shows the importance of a key concept: the lifetime value (LTV) of customers.

Generally, LTV involves the following: the profit per unit sold times the average units sold minus the costs of customer acquisition. This should be calculated over a period of time – say 24 to 36 months.

"We actually look at bookings just as much as revenue when we look at the LTV equation," said Jason Blessing, who is a general manager at Taleo (NASDAQ: TLEO). "We feel this gives us a clearer picture of what we are spending to get new year bookings. We feel that we are operating at peak performance if we are getting $2+ in new bookings for every $1 we spend on sales and marketing."

So what kind of strategies can help improve LTV? Well, I had a chance to interview Trynka Shineman, the senior vice president at VistaPrint (NASDAQ: VPRT).

According to her, a critical period is the 90 days of getting a new customer. "This is the most important time to establish a strong relationship with the customer," said Shineman. "If you can get a new customer to make a repeat purchase during that time frame, those customers are considerably more valuable over time than those that don't make a repeat purchase until later."

In the case of VistaPrint, about 63% of its bookings – in fiscal year 2007 – came from repeat customers. Shineman maintains:

"We have been successful because we have focused on making our transactional emails, such as order confirmation emails and shipping confirmation emails, into contacts that drive a subsequent purchase on our site. In fact, these emails have the highest open rate of any of the emails we send, which gives us a great opportunity to communicate to customers about other products and services. For example, we'll highlight products that are related to products they've purchased. This has proven to be an extremely successful approach for us. We have also developed other re-marketing efforts tied to the first purchase. These include inserts into our product packaging that showcase the full breadth of products we offer with an incentive to try a new product, and focus on making it easy for customers to reorder their business cards and matching products."

What's more, you should ask customers for feedback. "If you send out a semi-annual survey to customers, you are able to see areas where you can improve," said Shineman. "Customers who participate in these surveys and see the feedback that they give get put into motion will have a greater emotional connection to your company."

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Tags: eBay, featured, Lifetime value of a customer, marketing, new customers, repeat customers, retaining customers

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Reader Comments (Page 3 of 3)

9-25-2007 @ 10:59AM

Sandra said...

A new site has just opened up for those who are ready for a change... boutiquesavvy.com

There, you can list at fixed price any item of any value for only $1 (today & wednesday it's 50 cents!) and with their TWO FREE auto relists, your item can stay up for as long as 90 days! No final value fees, free stores, free pics up to 12 and other free stuff!!!!!!

I know it's new but you must check it out! Its very easy to use and you can get your listings up in a hurry.

9-28-2007 @ 12:09PM

Jim said...

AlphaLeap USA LLC http://www.alphaleap.com is another great place to start selling products using either osCommerce or Joomla GNU/open source shopping carts. They're currently offering 100% free hosting for one year. In addition, hosted sites are provided free product inclusion on the main search page which also provides viewers an unsafe site blocking feature which currently blocks eBay listings and other reported unsafe sites.

10-02-2007 @ 1:27PM

Laurie Brocato said...

After 8 years of sales,99.8% feedback, and recent power seller status my account was permanently suspended due to suspected trademark violation. Another household member re-registered without my knowledge to buy a dog house (not to sell) which also violated EBay’s rules. I had over 4000 positives.
I am a Registered Nurse and work full time with very young indigent girls during their first pregnancy and follow their child until he or she turns 2. I used most of the profits from EBAY to help these girls. I have homeless 12 year olds...Hurricaine Katrina wiped out a tremendous amount of housing here and other resources. It's impossible for me not to deeply care about the children that I work with. My trunk is full of clothes and toys.( We do weekly home visits if they have a home, otherwise I see them whereever they are).I do everything I can to help the girls.The studies based on the statistics of this program have proven that a young girl’s life can completely change if she is in contact with one nurturing adult who shows true interest in her. I have not had one girl that I’ve followed get pregnant again in the almost 3 years while I am seeing her and her child. I get them from probation and judges. Honestly, their lives do seem to change after being enrolled in this program. I get them back in school or GED classes....and try to get help with finding a job.
I bought closeout lots of clothes from department stores and individuals. It was my assumption that everything was authentic. I have written to the company that filed the complaint...and to Ebay. It was never my intent to violate any companies trademark.
I now have lots of merchandise-name brand clothing and no where to sell it. I will donate it to the girls and their families if I can't get reinstated.
If anyone has any suggestions, I would greatly appreciate your advise.

10-06-2007 @ 2:37AM

Glen F. Pritchett said...

Alternative Sites to eBay

www.believerbids.com
www.manions.com
www.Yahoo.com
www.Amazon.com
www.bidville.com
www.ecrater.com
www.ebid.net
www.bluejay
www.tazbar.com
www.ePier.com
www.AuctionQuests.com
www.wagglepoop.com
www.Angieslist.com
www.Craigslist.com (partly owned by eBay)
www.Craigslist.org (partly owned by eBay)
www.transworld-ads.com
boutiquesavvy.com
www.alphaleap.com
www.Auctionfire.com
www.localindya.com
www.abebooks.com
www.alibris.com
www.ola.com
barnes and noble (search for)
www.overstock.com
www.cashbackauctions.com
www.auctiva.com