Customer Lifetime Value
Customer Lifetime Value (CLV) is one of the most important metrics for shaping your customer acquisition strategy. CLV gives advertisers the big picture beyond just a last-click and first sale model that many e-commerce operations work to analyse.
Specifically, CLV is a prediction calculation of the net profit attributed to the entire future relationship with a customer or the known revenue value of customers since their first purchase fitting different user profiles from which one can derive an average. CLV is also an important business concept because it encourages companies to shift their focus from profits and revenue on a single sale to developing long-term customer relationships.
How do you calculate Customer Lifetime Value?
The most basic way to calculate CLV is to take the revenue you earn from a customer (or cohort of customers) and subtract the money spent on acquiring and serving them.
The total average is from dividing the total net revenue (after the costs of acquiring customers) by the number of customers.
Because you as a business are, via CLV, looking at the full value of acquiring each user, you can have more room to push bids and budgets for new users in the knowledge of how many times they are likely to buy and how much revenue you will probably get from them over time.
Using this metric and your collected user data from both internal and other analytics sources, you can slice and dice this collated information in many ways for extremely useful insights such as:
- What product, when bought by a new user, tends to be linked to a high CLV?
- What coupons bring you the highest CLV customers?
- What times of day or days of week yields users with the highest CLV?
- What geographies bring the highest CLV customers?
- What channels are involved in the most repeat buyers?
- How well do remarketing ads to existing customers work and through what channel (email, display, search etc.)?
What does CLV mean to Multi-Channel Attribution?
A lot of money is spent on a range of advertising channels by medium-to-large businesses and much of it is being delivered to people who have already been customers. Determining what such customers have seen prior to repeat buying is as valuable as knowing what new customers have encountered before becoming a customer.
Through this tracking of both online and offline advertising and sales, multi-channel attribution can help you accurately determine the customer lifetime value. If you track offline sales too, this extra data could lead to higher budgets on certain marketing channels because users who shop both offline and online are likely to have a higher CLV.
ESV Analytics, our multi-channel attribution and analytics tool can help you track users across devices and channels through combining their interactions with your website and messaging data with both online and offline sales to give you as complete CLV picture.
How To: Remarketing Lists For Search Ads (RLSA)
Users often (about 95% of the time) do not convert on initial contact with a website, instead, they do their proper research and return several times before they convert. As advertisers, we have the opportunity to continue to message such users to encourage more returns and, hopefully, faster purchasing decisions. We can do this via both Display retargeting but also in Search Ads.
Search retargeting can be done through implementing remarketing lists for search ads (RLSA). RLSA is a Google AdWords feature that lets an advertiser either customise search ads campaigns for users who have previously visited a site, and tailor ads to these visitors when they’re searching on Google or bid more or less for such users and even exclude such users entirely (and there are reasons why you would do that).
Remarketing Lists for Search Ads are useful for:
- Delivering special deal messages to previous (non-converting) visitors and catering these deals and messages even to the last product they looked at.
- Excluding prior visitors (or prior converters) from seeing Brand ads, if your priority for paid search is to prospect for new visitors.
- Delivering custom messaging to users depending on how recently they visited and if they never visited.
- Provide loyalty-related deals in ads to users who have bought within a certain time frame.
RLSA is so exciting because an advertiser can set bids, create ads, or select keywords that align the previous user’s behaviour. Remarketing lists for search ads use remarketing lists to enable these behaviour-based customizations.
Check out this great Youtube Webinar from Google AdWords that covers, in detail, how to launch an RLSA campaign.
RLSA leverages the fact that you, as an advertiser, know one crucial detail: this user has expressed interest in a product on our website. Below are several tips for improving an RLSA campaign:
- Increase RLSA ROI by bidding higher for new keywords. Focusing on keywords that either new or not yet in the top position will provide an advertiser with greater campaign performance because conversions can be driven by ads targeted to past site visitors. RLSA allows advertisers to adjust bids for those customers that have been to your website before, and bid aggressively for these visitors. When ads are targeted to past site visitors, choosing a broader keyword match type can help an advertiser improve overall campaign performance since it drives volume with less risk (RLSA volume is heavily dependent on how many visitors your site gets in the first place, of course).
- Remember audiences can be sliced and diced, included and excluded. You can combine your Google Analytics data on new vs returning visitors against your AdWords account data. This will help you decide if you want to include or exclude prior visitors or if it’s useful to bid up on an audience in a certain campaign that has seen a certain part of your site or left your site at a certain stage in the shopping cart procedure. You can subdivide audiences by location, how recently they visited, how recently they bought, how much they spent, the AOV of the product the last bought, and more.
- Tailor your ad text to your past site visitors. Keeping content fresh and enticing will lead past site visitors to return and enter the conversion process. These ads should highlight new products, recent deals, and offers to people who visited your site before, or an advertiser can even tailor ads based on recent product lines visitors have viewed.
- Combining RLSA with Countdowns Using the countdown feature in your ads along with exclusively targeting past visitors can boost CTR and conversion rates massively. Most offers are time-limited so you can highlight this with the Countdown feature described here.
- Use data. As always, it is important to capture and analyse data gained from any ad campaign. This is especially important when it comes to RLSA campaigns as there are generally higher conversion rates. You need to be a position to raise or lower bids based on the audience performance so data is a vital component.
RLSA is a powerful embellishment to the AdWords platform and gives you much more ability to focus on the needs and intent of the user much more – it opens the door to custom landing pages, customer offers, custom bids and, generally, more control.
Why 3rd Party Tracking
Tracking web data, such as clicks and conversions, is important to the success of any company with a digital presence. It’s most common for agencies and advertisers to choose just to use Google’s own conversion tracking to determine how their PPC efforts are performing. However, this option (particularly when not also using Bing and Yahoo tracking) is limited in effectiveness and is less flexible than you might realise.
Since Google has a large market share over the digital advertising world, some advertisers do not see the value in using Bing Ads or Yahoo Tracking, and instead often use the shortcut of duplicating any changes they make on Google over to the other search engines. The advertisers who use only one Search Engine tracking platform are missing out on the real behaviour patterns of users and, in some cases, mis-counting conversions. But even if you do use tracking from all three major search engines, much user behaviour is obscured or misreported. For example, for any ad campaign there can be a lot of cross-search-engine traffic and, if an advertiser only uses Google tracking, they will find that someone who clicks on a Bing Ad will register as converting on a Google ad if they have also clicked a Google ad recently. Or, for the same reason, if you have both Bing and Google tracking, both search engines could register a conversion for one user if that user had clicked on ads for both search engines. This is where 3rd party tracking (like ours) comes in to save the day and help advertisers make sense of their mounds of web/search engine generated user data.
Tracking your data + ESV Digital = maximising your ROI
We at ESV Digital, have always had our own 3rd party tracking system but in recent years we’ve evolved it into the EasyTrack system. This tracking solution not only functions on all websites and browsers, because it uses 1st party cookies instead of the often blocked 3rd party cookies, but it allows us to change tracking behaviour without changing website code and to track user actions beyond purely a click on a search ad should a client wish to add our cross-channel Analytics platform solution.
We, at ESV Digital, understand campaign data at a granular level because it is something we specialise in:
- We offer an end-to-end customer acquisition, conversion and retention service tailored to your exact needs – and all designed to help you turn your digital marketing budget into sales, and your sales into profits.
- Our team of Google AdWords and Bing Ads qualified analysts are experts at optimizing PPC campaigns. Our Account Management team has excellent analytical skills and can dive into the conversion funnel to get full insight into the true value of each of your marketing efforts.
- We have a single tracking solution for multiple search engines and channels.
- Tracking and understanding web data is often the bread and butter of 3rd party tracking solutions providers similar to ours, however, we set ourselves apart from the rest of the pack by owning our own cutting-edge PPC platform.
- Our proprietary Platform is one of the most efficient, and powerful automated bidding platforms in the SEM industry. We are constantly investing in the research and development that provides us with an edge over our competitors. Thanks to the platform’s built-in revenue attribution across SEM campaigns, our Account Managers can analyse conversion/revenue performance and implement optimizations based on this data in a unique and streamlined way.
At the end of the day, money is made through understanding the power of behaviour tracking and revenue attribution. Using our 3rd party tracking in concert with our management technology enables us to improve our clients’ conversion rates. While billions are spent each year in customer acquisition, all steps of the customer journey are often forgotten and the last click is given too much weight. Our EasyTrack solution provides the capability to optimise the effectiveness and quality of the traffic on your site and therefore, drive your conversion rate. By understanding where your visitors come from and how they behave, you can learn how to improve your website and user experience and focus your acquisition budget on the most profitable visitor sources.
Bottom line, the more informed your bidding and budgeting decisions are, the better the performance you will see. Want to know more about how 3rd party tracking like ours can help? Send us an email at firstname.lastname@example.org.