What is Lifetime Value?
Lifetime value, or LTV, is a metric that every business and marketer should be aware of. It is essential for business growth and long-term success, and allows you to effectively allocate marketing spend.
It is a calculation of the total value of sales, as opposed to a single event, and will also differ according to industry, and product sold. For example, products that are frequently used, such as hair-care items, will lead to customers with higher LTV potential, as they consistently return to purchase the same product. In comparison, a loan service requires further information to determine the LTV of a customer.
You can also compare the LTV of your users through different channels. For example, organic search might bring higher-value customers through in comparison to social or email. Having different LTV attributions per customer also enables you to understand the search and site behaviour of your customers. This can then be used to alter your budgets, and create similar audiences in remarketing campaigns, where you can adjust your bids accordingly.
You can also optimise ad messaging based on LTV, and craft it to resonate with customers who have the potential of a higher LTV. Creatives and text can focus on the longevity of their customer-company relationships, and lead to higher customer retention.
How can we use LTV for Financial Services brands?
Here, we take the example of a loan company. Let us suggest that a user received a second loan through an offline conversion. We can send the GCID and value back into Google Ads, and attribute them accordingly. However, after 90 days, you can no longer import these back into Google Ads. Instead, you can use offline modelling, such as building models in the Google Cloud Platform, to help you drive performance.
This is best explained in the following stages:
- If you have a CRM like HubSpot or Salesforce, you can push the data through Google Cloud into a table.
- This enables you to see the number of customers, loans, and when loans occur.
- We can then use this to inform the value of a customer, leading to informed decisions regarding the CPA bid. You can start to bid towards LTV, as opposed to shorter-term value.
- Google has a range of built-in tools in the cloud platform, like AutoML, which allows you to push this data through
- It will look at the attributes of customers, and make predictions regarding the value of the customer, helping you to see how much you can bid on the CPA model.
Optimising towards LTV is therefore a crucial long-term business goal. Ensuring that you don’t focus solely on short-term gains will enable you to maximise your ultimate profitability, and drive sustainable growth.
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