What is the lifetime value of an online customer? In other words, what does the average customer spend online for all the orders they place with a retailer?
This question held importance to clients using Magento, so we created an application to answer this. Along the way, we developed additional functionality that enabled our retail clients to know how many times a customer has ordered and the average time between orders. Armed with this information, they're able to do things to improve retention and shorten the buying cycle.
Now, for example, they can generate lists of all folks who ordered for the first time in January but haven't ordered since. This list is then used to send emails with special offers or to seek feedback on why they haven't ordered in awhile. This has helped increase repeat purchases and shorten time between purchases. We've even made it flexible enough to apply to those who've ordered 2, 3, 10 or any other time. Also, since we integrate tracking codes for different channels (Google, Email, Bing, etc), we can determine value of customers and behaviors of consumers from different channels. We've also set-up automated applications that are triggered by key variables (times ordered, total lifetime value, average order size, tracking code, etc).
Of course, once lifetime value is known, better decisions can be made in terms of advertising and spending. Clients who balked at customer acquisition cost of $20, for example, don't mind spending more once they learn the lifetime value is $200. They can scale their business profitably with a higher degree of certainty than before.