August 04, 2008

The Lifetime Value Of The Customer Who Writes Product Reviews On Your Site

Let's say you have a customer named Elmer. Elmer spends maybe $1,000 a year, making Elmer one of the top ten percent of customers in your database.

But Elmer does something else. Elmer reviews the merchandise he purchases from your brand. Elmer writes really good reviews, reviews complementary to your brand, reviews your customers love to read.

When Elmer writes a review, the item reviewed sells 25% better than comparable items. On an annual basis, this results in $400,000 of additional net sales, $100,000 of additional profit for your brand.

Lifetime Value from merchandise purchased = $500.

Lifetime Value from written reviews = $500,000.

How do you, the direct marketing executive, reward Elmer for his contribution to your brand? Elmer generates more annual sales than your average employee --- maybe more annual profit than your CEO generated last year!

Again, how do you reward Elmer? Should you reward Elmer? What do you do if you notice that Elmer stops writing reviews?

Discuss.