$1,905 per Customer!
Amazon has about 15 million customers. But how much is each
one worth? Last February, Jamie Kiggen dreamt his way to a
figure of $1,905. Hmmm...that sounds a little high...in an
industry noted for aggressive competition and razor-thin
margins...so thin, in fact, that Amazon's margin is
negative, minus 39%; it loses money on each sale. How could
it possibly make nearly $2,000 per customer? It couldn't.
The idea is preposterous.
Interestingly, Kiggen subscribed to the idea of lifetime
value analysis. The value of a company, he wrote in 1998,
"is its ability to attract, retain and profitably service a
set of customers." He even built a model to quantify these
things. But, for whatever reason, probably because it
showed how worthless Amazon really is, Kiggen seems to have
abandoned his model.
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