Outside of Digital Marketing, traveling and bird-watching, my interests include reading and learning more about the history (and geography) of key cultural movements. It has always fascinated me as to why the Renaissance took place in Italy, the Industrial Revolution kicked off in Britain and so on. Moving forward, the counter-culture of the 1960’s was one of the first ‘key cultural movement’ that I became aware of, largely due to my choice of music leading me to bands such as Jefferson Airplane, Yardbirds and more. So it just felt right that the first place I visited outside of India was San Francisco where I went to the famous ‘Haight-Ashbury’ district.
However, as I write the above, I realise that it’s strictly not true. The first international cultural movement I was aware of was the hippie movement. This was because I had close family living in Goa in the 1990s. We used to visit them regularly and could still come across stragglers of the movement on the beaches of North Goa.
I recently read a book about Ernest Hemmingway’s time in Paris, and that piqued my curiosity about that era. It was while reading more about this era that I learned more about the Roaring 20’s. It was the age of significant and unprecedented change in culture, music, fashion and more. Paris seemed to have been the place where all the action took place.
Other movements of the past century include the Beat Generation of the 1950s and 60s. Interestingly, one of the places where key figures of this movement lived in was Tangier in Morocco.
It will be fascinating to read more about these movements, understand why, where and how they evolved and why did they peter out. That’s my reading list for the next few weeks and months!
Life Time Value, or LTV, is one of the most important metrics when it comes to any business, but especially for an online business. It is, therefore, a big surprise for me that few companies that I have been associated with use this metric actively when it comes to managing their business.
LTV simply measures the value of a customer to your business.To calculate it, you need to have an understanding of how long can you get some revenue from your customer (the Life Time) and the total revenue you can receive from the customer during that period of time (the Value).
Let’s take an example. Let’s assume that the average customer purchases from your site for a period of 2 years, and makes purchases worth Rs. 2,500 in the first year and Rs. 1,000 in the second. Let’s also assume that you make a flat 20% margin on the sales.
So, in this case, the two-year LTV of your customers would be Rs. 500 (Rs. 2,500 * 20%) + Rs. 200 (Rs. 1,000 * 20%) = Rs. 700.
This means that, on an average, you make Rs. 700 from every customer you acquire.
An immediate application of this is that you now have a target for your Customer Acquisition Cost (CAC). If you wish to make a profit from every customer you acquire, then you cannot spend more than Rs. 700 to acquire a customer. Or, if you wish to make a profit of Rs. 200 per customer, then your CAC has to be less than Rs. 500.
Given the challenges with multi-channel and multi-device attribution, in my opinion, Customer Acquisition Cost, or CAC, should be the primary metric driving customer acquisition. However, I find very businesses adopting this, but that is a topic for another article!
Understanding LTV at an individual customer level also helps businesses create a highly targeted Customer Relationship Management strategy. One can create segments of users based on their relationship to the standard or expected Lifetime purchase behaviour and craft tailored messages, including offers, to those users who might be below the average LTV. Similarly, users with high LTV can be identified and developed as potential promoters / influencers.
So why do very few businesses adopt this key metric?
In my opinion, these are some of the challenges:
Lack of awareness and understanding of the metric – In general, most people are comfortable with pure transactional metrics. How many customers, sales, revenue did we make? And how much did we spend to make this sales? LTV, by definition, is a long-term metric. A business might only make profits from acquired customers after 6 months, 1 year or longer.
LTV is not a leading metric – As I mentioned previously, LTV is a long-term metric. For a new business, it might take up to a couple of years before they can realistically calculate their LTV. In the interim, they rely on more immediate (or leading) metrics to measure and run their business. And once they get comfortable with this, there is a natural and understandable reluctance to shift to another metric.
Lack of appropriate measurement for channel of customer acquisition – Measuring visits and conversions from a marketing channel is pretty straight-forward. However, tracking of new customer acquisition is a slightly trickier exercise. It typically requires some additional technical requirements to map a new customer back to the channel (either first or last) that led to that customer visiting your site and making their first purchase.
It takes time and effort to move the LTV needle – By it’s very nature, it takes a lot of time and sustained effort to move the needle when it comes to LTV. So, any business that wants to work with this metric would typically have to look at some element of the metric where short term movements are visible. For example, it could be one cohort of users, or a specific period in the Life Time, as opposed to the full LTV. As you can imagine, this brings in a degree of complexity from an analytics perspective that many businesses might not be resourced effectively for.
Team structures and goals – LTV is a difficult metric to break down for the various teams that are directly responsible for it. Many marketing teams are still structured on a channel basis. And it can be difficult to translate the LTV goal into an effective metric that operations and delivery teams can manage to.
Despite these challenges, I believe that every organisation, especially digital native ones, should have Life Time Value (LTV) as one of the key metrics that they measure and grow. It can provide both strategic as well as tactical insights that can prove very useful to scale their business in a sustainable manner.
I have been fortunate to have been surrounded by people with a strong passion and belief in living a more sustainable life and caring for all the other inhabitants of our planet. This has, among other things, led to my interest in bird-watching and, in general, a love for nature and outdoors.
As the world’s (human) population continues to rise, along with consumption, we all know that it is posing a huge strain on the finite resources of our planet. I believe that each one of us, in our own individual capacity, can play a role in preserving our environment. Here are a few practices that we, as a family, are trying to adopt. These are simple things that I would encourage everyone to think about.
Eat fresh and local – Not only is this the healthier option, but we can also save on food miles spent in transporting fruits and vegetables long distances.
Store and re-use overflow from RO water filters – Many households in urban India would have a RO (Reverse Osmosis) filter to purify the tap water and make it fit for consumption. These, unfortunately, waste a huge amount of vital water. A simple tactic that we have adopted is to save the overflow water in a container with a tap at the bottom and then use this for cleaning purposes.
Have a bucket bath – This was a tough one for me, especially. But I have not had a shower for over a year now. Not only am I saving water, but also time!
Carry a water bottle while traveling – Single-use plastics are a bane. And disposable water bottles are one of the largest culprits. We always carry a couple of water bottles while we are traveling and refill it from any available source. I think that we might have purchased only a couple of bottles in the past year and that was also when we were traveling to a remote location, ran out of water and could not find any source of potable water.
Carry re-usable straws – It would be ideal to avoid the use of straws altogether (it’s not impossible). But if you have to use one, please buy a non-disposable one made of bamboo or metal and carry it with you.
Carry your own take-away boxes when you are eating out – Rather than requesting the restaurant to pack your take-away food in their own containers, we carry a couple of food storage boxes with us when we visit a restaurant.
Practise home composting – My wife is passionate about gardening and composting. We have a composting set-up in our home that consumes all our food waste and provides manure to our home garden.
Use public or shared transport as much as possible – We have not owned a car in 4 years now. Yes, we do use app-based taxis, but for solo travel, we either use public transport or shared transport. Auto-rickshaws (in India) mostly run on gas which is significantly lesser polluting than petrol or diesel.
Strive for a more minimalist lifestyle – This is pretty much Work in Progress for us, but we are consciously trying to reduce wasteful consumption. Just because we can afford something should never be the reason to purchase anything. Rather, the question we should be asking is what benefit is the item going to be provided and trying hard to see if that benefit could not be obtained from existing products or human effort. Also, what do you do with items that you no longer need? Can these be reused in any way rather than just dumping as garbage?
Spend more time outdoors – This is something that I would like us to do more. For your next holiday or short weekend, can you go to a place that lets you be closer to pure, unpolluted nature? I would especially request parents of small children to try and take such nature holidays. If holidays are not possible, can you take them for nature walks near your place of residence? Most Indian towns and cities would have some nature club or passionate individuals organising nature walks. Not only would it be a different outing for the family compared to visiting a mall or movie theatre, but it can also be very educative. And hopefully, it will instill a love for nature and a desire to protect it for future generationsin the kids.
What are the different ways in which you are trying to lead a more sustainable life? Please let me know in the comments.
Clayton Christensen, Yuval Noah Harari, CES, Davos, tennis and more in this week’s set.
How Will You Measure Your Life – I must admit that I was not familiar with Clayton Christensen’s work until last week. The number of posts that popped up on my professional social network feed on his passing away last week led me to learn more about him. And I am glad I did. This article is nearly 10 years old now but still as, if not more, relevant today.
Yuval Noah Harari’s warning to Davos– Israeli historian, Yuval Harari, explained the threat from ‘technological disruption’ at the recent World Economic Forum at Davos. A must-read thought-provoking article. Among the key takeaways – ‘humans are likely to lose control over our own lives and also lose the ability to understand public policy.’ Also, ‘The global order is now like a house that everybody inhabits and nobody repairs.’
An unlikely vision of the future from the Consumer Electronics Show– What are some of the technological innovations that marketers might want to know more about this year? Read more about them in this article. “It is truly time for marketers to accept that the old models and traditional ways of operating are very much things of the past.”
The Inner Game: Why Trying Too Hard Can Be Counterproductive– This article claims that ‘The standard way of learning is far from being the fastest or most enjoyable. It’s slow, makes us second guess ourselves, and interferes with our natural learning process. Here we explore a better way to learn and enjoy the process.’ It takes the example of learning to be a better tennis player to explain the rationale for this statement.‘If we can overcome the instinct to get in our own way and be more comfortable trusting in our innate abilities, the results may well be surprising.’
Photo by Christina @ wocintechchat.com on Unsplash
The big news in the Indian tech space this week was the acquisition of Uber Eats by Zomato. Other than the fact that Uber Eats was the only food delivery app on my phone (which has now been replaced by Zomato), the acquisition was interesting because it effectively means that we now have a duopoly when it comes to food delivery apps in India with Zomato and Swiggy battling it out head to head.
The same story seems to be playing out at many tech industries. Uber and Ola / Lyft when it comes to on-demand transformation, Apple and Android on mobile phones, Chrome and Internet Explorer on browsers, Amazon and Flipkart / Walmart for online shopping, Expedia and Booking for online travel, Google and Facebook when it comes to digital ad spending.
I am sure this phenomenon is not unique to digital businesses, but it does seem to happen more regularly and faster for tech businesses than more traditional ‘offline’ businesses. For example, we still have multiple auto manufacturers, airlines, hotel companies, mobile phone manufacturers, etc.
This led to me think about why this phenomenon of the rise of duopolies plays out so frequently with digital businesses. These are my thoughts:
The inherent low levels of differentiation between competing companies – Product development being relatively very quick, it is fairly common to see digital businesses in the same domain quickly iterate and evolve their products such that they offer pretty much the same features and benefits as the others. When this happens, the choice of provider boils down to either personal preference (brand) or price.
Low costs of entry – The relatively low cost of entry means that, as soon as a new market opportunity opens up, many brands start up to compete for a chunk of the pie.
Consolidation – Initially, as the market grows rapidly, most of these new entrants are able to show decent growth and capture a decent share of the market. However, as the growth starts slowing with increasing industry maturity, some of these brands start to see a struggle in keeping up with the industry leaders. What causes some of these brands to surge ahead while other struggle at this stage is a topic for another article, but the result is that soon, the market throws up a few (typically 2 – 3) clear winners. At this stage, the rest have a few options:
Continue with a smaller share of the market with low growth potential
Shut down
Merge with one of the market leaders.
One of the factors influencing the decision would be the key investors in the brand. If it’s a Venture Capital backed entity, chances are they would take the third option above to make some returns on their investment. Self-funded companies might take the first option. If it’s a branch of another business with larger interests in other markets, they might take the second option to focus their resources in their core business.
The net result of all of these stages (which could occur in the space of just a few years) is the emergence of duopolies. My guess is that, if there we no constraints, we would end up with monopolies. Till, that is, the market becomes so large and the incumbent so entrenched, that the time is ripe for disruption!
Digital marketer, travel / culture / heritage enthusiast
Sanjay Varma 