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How do you effectively budget for customer acquisition?

I read a great post last week on the RKGblog on how to spend customer acquisition dollars wisely. Read it yourself, but remember that its audience is catalogers steeped in the world of direct marketers. That world has its own parlance that it trots out as shorthand to explain what they are doing. Internet marketers who don’t have a direct marketing background might not understand the advice in this excellent post, because they are lacking the background. So, if you understand the RKG post, you’re done for today. If not, you might want to stick around to get a background on two important direct marketing concepts that you can use to assess your acquisition budget on a regular basis.


The first concept you might want to get acquainted with is RFM—it stands for “Recency, Frequency, and Monetary”—a time-honored way for direct marketers to cull their mailing lists so that they identify their most valuable customers to lavish the most attention on. Web marketers from benefit from knowing how to apply RFM to the Web and from how to use RFM to increase the value of customers.
The other concept you might not be familiar with is Lifetime Value. When you are deciding how to allocate your acquisition dollars, wouldn’t you like to acquire customers based on the lifetime of profit that a customer relationship will bring you, rather than simply the profit on the first sale? If much of your business is built on customers returning to you to buy more, you might want to a simple way to calculate Lifetime Value for your customers.
Sometimes the advice you get might seem a bit daunting, because it assumes you know more than you do. Don’t be afraid to slog through the terminology and learn what it means so that you can absorb what the experts are prodding you to do. There’s no reason that you can’t be an expert Web marketer if you’re willing to learn a bit of direct marketing background.

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Mike Moran

Mike Moran is an expert in digital marketing, search technology, social media, text analytics, web personalization, and web metrics, who, as a Certified Speaking Professional, regularly makes speaking appearances. Mike’s previous appearances include keynote speaking appearances worldwide. Mike serves as a senior strategist for Converseon, an AI powered consumer intelligence technology and consulting firm. He is also a senior strategist for SoloSegment, a marketing automation software solutions and services firm. Mike also serves as a member of the Board of Directors of SEMPO. Mike spent 30 years at IBM, rising to Distinguished Engineer, an executive-level technical position. Mike held various roles in his IBM career, including eight years at IBM’s customer-facing website, ibm.com, most recently as the Manager of ibm.com Web Experience, where he led 65 information architects, web designers, webmasters, programmers, and technical architects around the world. Mike's newest book is Outside-In Marketing with world-renowned author James Mathewson. He is co-author of the best-selling Search Engine Marketing, Inc. (with fellow search marketing expert Bill Hunt), now in its Third Edition. Mike is also the author of the acclaimed internet marketing book, Do It Wrong Quickly: How the Web Changes the Old Marketing Rules, named one of best business books of 2007 by the Miami Herald. Mike founded and writes for Biznology® and writes regularly for other blogs. In addition to Mike’s broad technical background, he holds an Advanced Certificate in Market Management Practice from the Royal UK Charter Institute of Marketing and is a Visiting Lecturer at the University of Virginia’s Darden School of Business. He also teaches at Rutgers Business School. He is a Senior Fellow at the Society for New Communications Research. Mike worked at ibm.com from 1998 through 2006, pioneering IBM’s successful search marketing program. IBM’s website of over two million pages was a classic “big company” website that has traditionally been difficult to optimize for search marketing. Mike, working with Bill Hunt, developed a strategy for search engine marketing that works for any business, large or small. Moran and Hunt spearheaded IBM’s content improvement that has resulted in dramatic gains in traffic from Google and other internet portals.

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