What is it?
LTV, or the lifetime value is a custom audience makeup that allows the wise Facebook marketer to create a custom audience around their most “stable” and long-term customer. The lifetime value is the total value of a single customer over the course of doing business with you over a specific period (i.e. 1 year or 10 years, whichever is most relevant to your product/service). This period is significantly different from business to business and whether or not your business is product-based or service-based.
How to use LTV?
Using LTV is relatively easy. First, you will need to have a list of customers with the LTV variable in it (excel spreadsheet). In addition to other variables such as First Name, Last Name, City, State, Age, the LTV column on the excel list can show the values of customers who spend a specific amount in your online business/local business.
Once the LTV list has been generated, simply create a “lookalike” audience with the LTV variable, which builds a list of potentially warm leads (new customers) that most closely match those individuals with an LTV variable.
This is a great tool to utilize when forming Facebook ads, as it will allow Facebook to find you clients that are most critical to your business success.
Many newbie marketers only look at the cold ROI, or the return generated by the first ad interaction. The wise marketer understands that the real profit comes from long-term interaction, which is the entire point of calculating your lifetime value. This includes the various up-sell opportunities and return business over the course of your customer doing business with you.