till death do us part amazing lifetime value in ppc
TRANSCRIPT
© 2015 Copyright - Vantage Search Marketing
Till Death Do Us Part: Amazing Lifetime Value in
PPC
© 2015 Copyright - Vantage Search Marketing
What’s Covered:• Knowing target CPA and ROAS
• Issues with target CPA and ROAS
• Shortsighted PPC Strategy
• Incorporating LTV via parrots
• Lifetime Value Resources
My lifetime is up to 75 years, that’s a lot of value!
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Why Lifetime Value?
• Customers who come back are undoubtedly more profitable than the one’s who don’t.
• As competition in the search marketing world increases, it’s important to be able to focus on the searcher that doesn’t just convert once.
• Knowing the lifetime value of a customer is essential to a business in it for the long haul.
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CPA/ROAS 101: Prerequisite to LTV 203
Definitely a certified Oxford course
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CPA/ROAS 101• A business should know its target CPA and/or ROAS to be able to
optimize and set goals within an account.
• You’ll need to track how many conversions you get, where they come from, and how much each conversion costs.
• Once the data starts flowing, you’ll be able to make CPA and/or ROAS predictions
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CPA for Lead Generation• Take the amount you’ve spent on your PPC and divide that by the
amount of conversions you have gained in a month.$1000 spent ÷ 100 leads = $10 spent per lead
• The issue with this calculation is it’s short term and it assumes that every customer is equal.• Customers come in all shapes, sizes, spending patterns, and levels of
loyalty• Which of these leads is worth more or less?
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ROAS for E-commerce• A good way of focusing your e-commerce PPC strategy is considering
your return on ad spend, or ROAS.
• You spend $2500 and generate $3000 revenue in a 30 day cycle. Your ROAS is $1.2 for every $1 spent.
• Only $1.2? How do I pay for operating costs with that? Well, we’ll have to change the way we think and look to the long term.
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LTV 203: Dealing with Shortsighted CPA and ROAS• Most big advertisers are aware that only using a monthly target CPA
or ROAS is shortsighted and limits PPC success.
• LTV let’s you ask:• if you’re acquiring the best kinds of customers• what marketing channels these customers come from• and whether you’re doing all you can to retain these customers
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Thinking in the long term• Reoccurring instances of business from the same lead or visitor on
your website tell you that your month to month CPA isn’t the end-all be-all to focus on.
• If you’re looking to make a profit on the initial sale, you might lower your bidding, reducing exposure and position on the ad results page.
• If you break even on the initial sale, you make a profit when the customer comes back.
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Go to the LTV light• LTV is a long term way of looking at which customers are worth the
most, and using this information to readjust your PPC strategy can result in you getting the most valuable customers in the most cost effective way.
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Talking Parrot Paradise, An LTV Example.• You own a business selling talking parrots.• You’ve recognized that the campaign promoting cockatoos has a high
CPA of $15. This is a lot more than the $5 CPA of the campaign promoting parakeets.
Hey listen, this is where it gets good
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Parrot Paradise• It looks like you should focus more of your budget on the parakeet
buyers, on a first glance they seem to convert for less.
• However, a year of sales data on the two different types of customers looks like:
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Parrot Paradise• The cockatoo buyers give a profit of $65, while the parakeet people
give you a profit of $40.• You now take the monthly CPA of either customer and subtract it from
the gross profit:
• By just using a one year cycle, you can see how focusing on month to month CPA might lose Parrot Paradise money.
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Parrot Paradise• You’ve had tracking set up for your customers for a while and you’ve
also been monitoring trends in their spending over time. Taking this data you can see how your best leads are even more valuable:
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Parrot Paradise• Looking solely at monthly CPA, you’d probably have budgeted more
money for the parakeet campaign• Using LTV conscious calculations shows that the cockatoo customers
earn more money in the long run.
What’s the LTV of a cracker?
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Lifetime Value Resources• CPA = (Cost of leads) ÷ (Number of leads)• ROAS = (Revenue from Ads) ÷ (Cost of Ads) • Basic Equation for LTV:• (Average Value of Sale) x (Number of Repeat Sales) x (Average Retention
Time)
• Avinash Kaushik and David Hughes go over the minute details:• http://www.kaushik.net/avinash/analytics-tip-calculate-ltv-customer-lifetime-value/
• Detailed Lifetime Value Model• Lifetime Value of a cracker ≈ 13 calories
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LTV Long and Prosper!
• With accurate LTVs you can confidently set target CPAs, forecast your PPC, and optimize for the most valuable kinds of conversions.
• If you're still unsure about LTV, or want an expert's opinion on how your LTV should be influencing your PPC, contact the team at Vantage for a free PPC consultation.