Question

Topic: E-Marketing

Average Cpas And Ltvs Across Multiple Mediums

Posted by Anonymous on 5/29/2010 at 7:39 PM ET 250 Points
We are trying to accurately size a market opportunity of a online product that drives educated customers to online applications.

To size this opportunity we need to know average Cost Per Acquisitions (CPAs) for online applications (or at least some type of range) across all online advertising mediums.

Then we also need to value the average LTV of a customer across the same grouping of companies. (ideally how much each month or year of use adds to the customer LTV).

I understand that this is a near impossible task because user value varies greatly across many online applications and websites (The CPA and LTV for Amazon is going to be very different than the CPA and LTV for Gmail).

Any data points or information will be helpful, even if it just for one or two sites or industries.

Thanks,
Nick
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RESPONSES

  • Posted on 5/29/2010 at 8:51 PM Accepted
    Nick, I would caution you to not rely on any figures like the ones you request. That's not because I think they are irrelevant, but because your objectives and needs are unique, and basing decisions on the unknown and uncertain objectives and experiences of others is almost certain to lead you in the wrong direction.

    I've also seen how misleading averages or even ranges can be. They include information from start-ups and mature companies, companies that were prepared to lose a lot of money, and companies who were losing money and didn't even know it until it was too late. They also include companies that were using integrated marketing and those who were just experimenting with etail marketing. Etc. Etc.

    You can do better than trying to base any decisions on average CPAs and LTVs.

    Having said all of that, I have direct experience in a mid-sized in-home service business where the LTV of a customer was about $275-300 (sales dollars, margin about 25%). Cost of acquisition across multiple media ranged from $25-55. We tracked it pretty well and had the marketing machine running smoothly after about 6-8 months of testing/experimentation. (Not sure how this can be helpful, but I wanted to respond to your request as directly as I could.)
  • Posted on 5/30/2010 at 10:13 AM Author
    Thank you mgoodman.

    I know that relying on averages is not a good idea and usually leads to poor decisions but we need some quantitative data to prove our point that "education of customers generates a higher lifetime value".

    Do you think that there are some percentages that may be better? For example, in the instance you gave, LTV was ~10x more than CPA...

    Any other ideas would be helpful.
  • Posted on 5/30/2010 at 11:18 AM Moderator
    What if "education of customers" does NOT generate a higher lifetime value? Isn't that a possibility?

    And I don't understand how knowing LTVs and CPAs for other companies -- especially averages -- will help you prove or disprove your thesis. You're assuming some causal relationship, and that may or may not be the way the world works.

    And it may be different in your business than it is in other businesses. I don't see how the information you're requesting bears on the issue you're facing.
  • Posted on 5/30/2010 at 12:03 PM Author
    Right. This is the hypothesis that we are trying to prove. We are trying to determine if on average, is an educated customer more valuable. For example, does someone who knows the ins and outs of amazon.com buy more products?

    Any research to this point would be helpful.

    I know that it can be argued either way and some business purposely try to pull the wool over their customers eyes.
  • Posted on 6/3/2010 at 5:01 PM Author
    Hi everyone,

    We still haven't found what we were hoping for. Does anyone else have any ideas?
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