When we sit down with clients to determine ROI, the first thing we determine is the LTV (lifetime value) of their customers. This applies to both service and product-based companies. It is important to look beyond just one sale or a single month of subscription. This lifetime value metric is so critical in determining so many following factors.
The LTV is critical in determining the CPA, or cost per acquisition of a sale. If an average sale is $700 but the lifetime value of your customer is $5000, how much are you willing to spend to acquire the first sale and gain a long-term customer (with needed retargeting costs figured into the equation)?
Your investment requirement to grow your business is heavily based on the LTV of your customer and how much you are willing to invest to grow your customer base.
LTV & Facebook
The LTV metric became so significant in coordinating a company’s growth trajectory, that Facebook integrated the metric within their custom audience lookalike miner. Now, when creating custom audiences, you can create a LTV based audience that Facebook will recognize in their “lookalike”.
How we use it.
At Adwhip, we help determine your company’s customer lifetime value, your initial investment to acquire a customer, and finally the short-term and long-term ROI. Additionally, using Facebook’s new in-depth tools on LTV lookalike mining, we can help build LTV-focused customer growth more fluidly and effectively.