

Get monthly notifications
Grow Your Revenue in eCommerce By Customer Lifetime Value
What to look at in order to increase revenue from your paid marketing efforts in e-commerce. How to make sure you are not cutting away profitable customers.
Understanding Customer Lifetime Value (as often abbreviated CLV or LTV) can be tricky but nevertheless one of the most important metrics in business and especially e-commerce whenever trying to understand where the profitability in customer acquisition lies.
As the name implies Customer Lifetime Value shows the accumulated revenue you recieve from a specific customer over time, during the entire period the customer engages with your business. The tricky part is measuring this right and understanding how much is your business ready to spend to acquire this customer. This especially becomes relevant discussion in relation to Paid Marketing or Advertising like Google Ads or Google Shopping.
So let's look at a simple way of calculating historic customer lifetime value:
- Historic CLV = (Transaction1+Transaction2+Transaction3…) X AverageGrossMargin
Now another metric often used when looking at return in an e-commerce paid marketing is of course ROAS or simply put = Return on Ad Spend. The calculus of that metric is below:
- ROAS = Revenue from Ad Spend/ Cost
This is a very important metric to keep track on, especially when considering acquisition cost however, important to note that without taking into account the CLV/LTV you are only seeing half of the picture. ROAS is all about winning that first conversion, but it doesn’t take into account the ultimate business measurements of profitability, margins of returning customers.
Consider this; the customer acquisition cost for a first time buyer of products with low margins may be very high. However, if you are able to win the loyalty of that customer long-time the customer acquisition cost is far presided by the value of the customer loyalty. Therefore keeping track of the individual purchase journey is crucial in order to understand where the cut-off for investment should lie. The customer may only be profitable on its 3rd repeat purchase and therefore it is important to have that consideration in your bidding strategy.
A good advertising agency in paid marketing should always look together with you at your Customers Lifetime value and present the purchasing path from organic and paid search. Together you should establish where you see the profitability and growth coming from in order to make sure you are not cutting away future profitable income. Any eCommerce business should always looks to the metrics of ROAS and CLV/LTV to fully understand and take use of the best strategic implementations in order to grow their business even faster.
Featured Articles
The Full Funnel Approach and Pinterest
Today, we're going to delve into the significance of working with a full-funnel strategy and understanding why a comprehensive media mix is crucial. We'll also explore an example of how this approach and including Pinterest in the media mix led to a significant decrease in the cost of sales for Houdini.
Master Text Overlays: Boost Ad Engagement
In recent years, capturing the attention of your target audience has become more challenging than ever. Businesses and marketers are constantly on the lookout for innovative ways to stand out in the crowded advertising landscape.
One effective technique to draw attention to your ad's message is through the use of text overlays on image and video ads. In this blog, we will explore the best practices for incorporating text overlays, ensuring your message is impactful without compromising the visual appeal of your ads.
Similar Articles
The Full Funnel Approach and Pinterest
Today, we're going to delve into the significance of working with a full-funnel strategy and understanding why a comprehensive media mix is crucial. We'll also explore an example of how this approach and including Pinterest in the media mix led to a significant decrease in the cost of sales for Houdini.
Master Text Overlays: Boost Ad Engagement
In recent years, capturing the attention of your target audience has become more challenging than ever. Businesses and marketers are constantly on the lookout for innovative ways to stand out in the crowded advertising landscape.
One effective technique to draw attention to your ad's message is through the use of text overlays on image and video ads. In this blog, we will explore the best practices for incorporating text overlays, ensuring your message is impactful without compromising the visual appeal of your ads.
The Next Big Thing: 5 Digital Marketing Trends to Watch for in 2023
Digital marketing is a constantly evolving field, shaped by emerging technologies, changing consumer behaviors, and the dynamic nature of the online landscape. Staying on top of the latest trends is crucial for businesses and marketers to effectively engage with their target audience and drive growth. In this introduction, we will explore some of the key digital marketing trends that have emerged in recent times.
The Power of Branding on Meta
Are you ready to unlock unparalleled opportunities and take your online business to new heights? In a rapidly evolving digital landscape, Meta continues to revolutionize the way marketers and entrepreneurs create an impact on buyers.
Today, we will talk about the immense potential of branding on Meta's platforms, Facebook and Instagram based on our Meta Branding (Online Course). Brace yourself for insights that will empower you to establish a strong brand identity, harness consumer trends, and optimize your advertising strategies like never before! Ready to spearhead your business to success? by understanding the potential of branding on Meta and how you can tap into it. Excited? So are we - let's get into it!
A Sneak Peek into Pinterest's 2023 Product Updates!
Pinterest is improving its Ads Manager to provide a seamless experience for advertisers. New features will be released throughout 2023 to optimize advertising strategies. Pinterest aims to offer powerful tools and insights for better campaign results. Get a sneak peek into the exciting updates coming to Ads Manager this year.
Take Your TikTok Ads to the Next Level
To look into the future, let us peep into the past once. TikTok was once loaded with content focused on dancing and lip-syncing videos inclined more towards an uprising for polished platforms and enabling easy access and non-positionality of content largely consisting of short videos.
Top eCommerce Predictions and Trends for 2023
The eCommerce industry is constantly evolving, especially with the advancement in tech in recent years and it can be challenging to keep up with the latest trends and technologies. In this article, we'll be forecasting some of the most exciting eCommerce trends for 2023. Knowing about these trends will help you can stay ahead of the curve and understand what the future holds for online shopping. From continued growth of mobile eCommerce to the rise of social media eCommerce, these are the trends and technologies that are expected to shape the eCommerce landscape in the coming years. Keep reading to learn more!
All About TikTok SEO 2023
INTRODUCTION
We are in the middle of an ongoing search evolution that is gradually happening! TikTok is arguably becoming a search engine, which has been recently acknowledged by Google too.
Why You Should Get Started with TikTok Ads Today?
Amazon and HBO have spent huge money on TikTok advertisements in the U.S. during the months of January and May 2022, says Statista!
And why not? TikTok reached the “1 billion” count on its daily active users in 2022! Hence, advertising on TikTok is just inescapable!
TikTok Ads are booming because their widely diversified audience has helped brands gain high profits with natural virality.
Create Successful Holiday Ads on Facebook & Instagram
Did you know? According to AdMaven, holiday retail sales have reached a whopping $789.4 billion in the year 2021!
It's the holiday season! Everyone right now is on a shopping spree and this is the time, businesses have to be on their toes. If you are not playing with your Facebook and Instagram right now, you are at a big loss in this game of Holiday Ads!
Let us begin by jumping into some holiday insights for the year 2022. Interestingly, shopkeepers have been receptive to trying out new brands across various niches this time round.
Peak Season 2022