How do you, in your role at the company, or your company define a "Customer"?

The customer identity and value determination exercise is a critical function of marketing executives. What is a free end-user worth? What is a trial customer worth? What is the value of paid-traffic-visitors in my business? Is the seller in my marketplace really a customer, or are they a partner?

These are the questions a marketing executive needs to be thinking about from the get-go. And, it’s important to always be thinking how value determinations change over time, as the business grows, the product offering grows and more data becomes available. Increasingly, companies creating games, apps and services have to share customers with platforms, like Facebook or iTunes. But, in the end, most marketing managers understand that any end user of your app, service or platform is a customer — regardless of whether or not they’re paying.

For our business, free-to-play is an opportunity to prove value and show the potential of our games. So anyone that creates an account, profile or downloads a game is a customer. OutSpark customers can buy Sparkcash, buy items within a game, or perform an action that generates revenues for our business. But we view all of our players as customers, whether they’re strictly free-to-play, or frequent purchasers of Sparkcash or virtual goods.

What is the "Value" you want to derive from a customer?

The simple answer is a two-dimensional lifetime value (LTV) calculation that is the output of revenue trending data.  This simple answer is a number — real or estimated — derived for the purposes of estimating unit economics, gross margin, capital requirements described in venture raise presentations.  This is the way startup business managers are forced to think to ensure a future.  But, for the marketer, we’re allowed the additional perspective to think in terms of hypothetical viral coefficients attached to each new user and speculate on variable increase in revenues based on features and functionality.  In games, it’s about revenues and engagement tied to virtual goods and engagement (new worlds, new levels).  So, when we speculate on LTV, we have value metrics that are less tangible than dollars — engagement metrics, usage data — that  we assign value to based on the potential for tangential revenues, or incremental average revenue per user increase.

Frequently, these creative ideas for creating more value from customers are described as brand value.  But, I prefer to think of customer-derived-value in terms of the sum of all that can be realized through creating an extensible core value.

For a games company, content and community are paramount — those things create a reputation, attract customers and create all additional revenue opportunities.  If you have a flexible virtual currency, that’s a plus.  If you have kick-ass promotions or advertisers, even better.  If you can bundle or offer your customers compelling partner services at discounted rates, great.  But all of these revenue opportunities create value on top of a core value and brand reputation.

How do you assign “Value” to your customers, both free customers and paid customers?

Every company has a value-determination formula that maps to their existing P&L sheets.  But, value assignments are based on models and invariably include derivative future revenues based on a hypothetical that might or might not come to fruition through partnerships or product line development.  A marketing guy can get caught up in the modeling and take the world view that every customer is a potential customer of every service layered onto the core value proposition — a high LTV customer.  That’s dangerous thinking.  The best way to think about a customer is at the unit-economic level.  My core value represents X$ to this class of customer based on a realistic match of service and budgets profile information, and, additionally, my core value represents Y$ for this other class of customer and Z$ for another class of customer, and that value factors variables representing the cost of acquisition and conversion.  The important thing to remember is that X, Y & Z are going to change, just as the variable cost of acquisition will change due to ad market dynamics and fluctuations in “virality”, like when Facebook limited app invites to 10 users per day, or you lose your top spot in natural query results.  So in this respect, value assignments are a day-to-day exercise, because the value is always shifting — at least it should be.

Assigning value outside of this framework is much less science and much more art, and the companies allowed to project value based on “phenomenon” or “the network effect” are really rare, usually media companies.  In those instances, companies can project value beyond advertising or subscription revenue and insinuate that they are taking “audience share” away from the dominant brands on the web, thus adding to their value determinations by subtracting market share elsewhere.  I’m not saying I understand these value determinations, but that is how some companies are allowed to assign value.  We’re seeing that in social games companies that are attracting hundreds-of-millions of customers.

How do you acquire your customers?

We acquire customers through other forms of media — free and paid placements.  I’ve a personal interest in understanding the intersection of media and interpersonal communications — the area now commonly referred to as “social media”.  Understanding how one person recommends anything to another person is critical to creating marketing efficiencies.  And, efficiencies are one lever in the determination of value — just as valuable as scale determinations.  I am fascinated by the potential for a product that has a 1.1x viral coefficient at scale wherein that one customer referred by another has a CPA of 0$ due to “baked in” virality in the product.  For this reason, I spend a lot of my time focused on our games and our website.

Do you use any of the following types of marketing, and if so please explain a little about each, how successful they are for you.

- Online Advertising

Online advertising is critical.  Display, SEM, affiliate marketing and promotions.  Since we have such a healthy user base, marketing to our own customers through our own properties is critical too.

- Online Marketing

PR is huge in terms of generating awareness of new games.  There are other business and corporate reasons to do PR, but product promotion is critical in terms generating customers and supporting click-through.

- Affiliate Marketing

Affiliate marketing is interesting to me — I think there are really two types of affiliates.  There a large media companies that perform lead-generation and move large crowds to trial you service based on another offer or motif.  And, then there are niche media and communities that are incredibly effective at matching products with their audience, and create very efficient customer acquisition opportunities.  Of the two, the latter type of marketing is most interesting to me.

- SEM (Search Engine Marketing)

Search is very important — seo, sem, answer communities.  All of the other means of connecting with future customers are less-qualified than search and answer communities.  There is nothing quite like search in terms of sourcing qualified traffic.

What do you actively do in order to retain customers?

In the games space, retention is all about marketing to your own customers using the in-game experience and emails.  Outspark has the added connections of our own profiles and communities, and customer communities outside of our domains at other networks, like Facebook.  But, I think “retention” marketing in the social web and online games has diverged from “churn reduction” and customer save methods you find in most businesses.  For Outspark, we have to engage our customer, be responsive and substantive in order to preserve our reputation and create ongoing customer relationships that produce ongoing revenues. So, rather than think about retention, a guy in my position has to be thinking about engagement, even before the customer gives us the first dollar.

Do you track and optimize your Customer Acquisition?

We do, and there are varying degrees of optimization.  I’m not disappointed about our level of optimization, but I have plans to test more and create the potential for further optimization as our engagement grows, and our customer relationships expand within and across games.

Do you track your customers and the Value they provide?

We have a custom business intelligence system that we are augmenting with a popular solution right now.  I’m relatively new to Outspark, but I’m very impressed with our BI team.

Do you track the Lifetime Value of your customers and the churn?

Of course!

What else do you track and why?

As you can imagine, MMOs, the numbers of methods for generating incremental revenues are expansive — too many to describe.

What tools do you use?

The thing about Outspark is that we’re actually a platform.  People think of us as the first Western company to monetize Asian games in a free-to-play model.  But, in reality, we have built a launch platform for our partners — some of the best publishers in Asia — and a part of the value that we bring.  In-game monetization tracking and reporting are a part of our platform.