Interview: Sheridan Hitchens, Auction.com on Customer Lifetime Value as the Cornerstone for Marketing Analytics
We discuss Customer Lifetime Value (CLV) metric, maturity level for the CLV metric, different models for calculating it, challenges in designing strategy based on CLV and tackling attribution.

He has also held positions at two leading online games companies, Kabam and Playfirst, where he has built out Analytics and Big Data groups from inception. Earlier on in his career, Sheridan worked at Procter and Gamble in the areas of Decision Support and Executive Information Systems. He also worked as a Managing Consultant at Towers Perrin.
Sheridan holds a Bachelor of Arts degree in mathematics from Cambridge University and an MBA from the Haas School of Business at the University of California, Berkeley, both with honors.
Here is my interview with him:
Anmol Rajpruohit: Q1. What are the key advantages of using Customer Lifetime Value (CLV) metric? For whom does this metric holds most promise?

Sheridan Hitchens: I think the key advantage is typically for the marketing department; if you understand lifetime value, particularly across demographics and acquisition channels, you can understand what marketing investments are ROI positive and where you should invest or cut back.
AR: Q2. What do you think about the current maturity level around the Customer Lifetime Value metric? How reliable are the current models?

The biggest factor in the reliability of online models, is our ability to predict future revenue flows. In a traditional industry such as utilities where customers pay monthly may be much better able to predict than an industry undergoing rapid change, like online media.
AR: Q3. In your talk, you showed the simplistic equation for calculating Customer Lifetime Value (CLV) based on future discounted cash flow. Is there an inherent assumption that no future investment would be required to sustain or improve CLV? Are there any Analytics tools that you would recommend for advanced CLV calculations based on wide range of inputs?

As for tools, I’m sure there are some sophisticated ones out there, and no doubt I’m going to subject myself to a bunch of vendor calls, but most CLV models seem to be done in Excel, and you know that’s often fine.
AR: Q4. What are the biggest challenges in using the Customer Lifetime Value (CLV) metric to design business strategy? What kind of external data can be leveraged to improve the confidence in CLV metric values?

AR: Q5. In order to calculate Customer Lifetime Value (CLV), one needs to have the correct attribution model. In today's world of several consumer touch-points and multi-platform online experience, what are your recommendations to develop a reliable attribution model?
SH: Part of the problem of many of the efforts I see in this area is that they often start by asking question like “What is my Customer Lifetime Value?” or “How should I attribute my marketing spend?” These are somewhat abstract questions, and they don’t address the underlying decisions you’re trying to make. It would be better if you started with questions like “Should

As for attribution models, they’re complex, and to understand how they may be subject to inaccuracies, you only need to consider yourself. If I buy a Gap Sweater, after I saw a billboard on my way to work, got a recommendation from a friend, and clicked on a keyword ad in google, I can’t tell you what percentage each of those three brand interactions contributed to my decision to purchase. Of course you can look at what effects different combinations have and there’s some very interesting work out there on this. One marketing tech company I came across, Abakus uses game theory to do it, which is absolutely fascinating. The bottom line is it’s a very complex problem and there’s no silver bullet.
Second part of the interview
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