LevelUp – Understanding Business Models – Lifetime Customer Funnel Analysis

Once you have a customer, you want to keep them using the product they have purchased in addition to future products you wish to sell them.

Godaddy is a great example of this as sometimes you forget their roots are as a domain registrar.  This is because they now offer a wide range of digital products like web hosting, services like web design, and physical products like servers.

The goal of Godaddy is to get recurring revenue from customers beyond the yearly domain renewal fee.  By offering hosting or email, they bill you monthly.  Additionally they have high ticket items like web designers where they can charge one-time fees in the hundreds of dollars.

Godaddy has a great business model because all of their offerings and recurring revenue coming from domain registration, hosting or email accounts have minimal customer service and high retention rates.  This results in high Customer Lifetime Value which is a key statistic to monitor as you build a business.

Lifetime customer value can be calculated by determining the average customer expenditure per visit to the site and number of visits made each year.  This leads to the calculation of average customer value per year.  You can then estimate the number of years someone is likely to stay a customer in order to calculate lifetime customer value.

View the video below to see how to calculate average lifetime value of a customer.  Note that this video is dealing with aftermarket domains, and thus dealing with Godaddy Auctions, (auctions.godaddy.com), not someone buying unregistered domains from Godaddy.com itself.

Important Note:  This is just a high level guess and is simply meant to be an overview and to get you thinking about how to increase LTV for your own businesses.   We’ll be going into the nitty-gritty details of estimating conversions at each step of the online and offline funnel in later steps in Path 3.

Exercise

Calculate lifetime customer value on your competitors.

Average Customer Value Per Year = Average Expenditure Per Visit X Average Number of Visits Per Year

Average Lifetime Value= Average Customer Lifespan X Average Customer Value Per Year

Example

Success Criteria

• You have estimated the average expenditure per visit for each competitor
• You have estimated the average number of visits per year for each competitor
• You have estimated the average customer value per year for each competitor
• You have estimated the average customer lifespan for each competitor
• You have calculated the estimated average lifetime value for each competitor