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Jonas Hagströmer Theodorsson

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How to optimize the lifetime value of Google Ads

Tools and technologies used by a digital agency today are more advanced than ever. But not everything is about boosting ROI, you also have to be very aware of who your customers are and spend time on making sure that you know what LTV model you should use for your business. For many e-commerce companies, LTV is the most important metric out there.


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LTV or lifetime value, as the title suggests is the value of a customer through their entire life. Let’s say a customer is buying makeup, they’re looking for their favorite brand. They click on an ad, go through with the purchase and get the product sent to their home. If everything in the process works smoothly, it is probable that they will return in the future. Therefore, the LTV is a calculation of the total value of sales, not a single purchase.  

Depending on what kind of product it is, the value of LTV can vary a lot. For products that people use a lot, like wear-and-tear products, it might be better to pay a lot to get a customer with a high potential LTV, since that customer will keep coming back. That would probably decrease your short-term ROI but would be profitable long-term. But let’s say you have a furniture business with exclusive products. For a business like this, it won’t be optimal to try to take in customers with a high LTV, since they probably won’t need a new sofa for a long time after they’ve purchased it.

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Get to know your customers

 

It’s important you try to find out some basic information about your potential customers. It will prove inefficient to regard every customer as having equal LTV. You want to be aware of factors such as demographic and location data, the frequency of purchase and the average purchase size. That will allow you to know where to increase or decrease your marketing spend, based on your strategy setting this up in a data-driven way is the future and the only option for an E-commerce company to manage LTV in the future.

After that, you need to determine how you can, in a personalized way, reach out to your target customers. There is usually an initial long buying process for every customer, as seen in the picture below. You want to know what these customers go through during this process, like where they shop, what they shop, what works well and what doesn’t.

 

When you know who your high-value customers are, you can start figuring out through which channels you have the best chance to reach them. Today, a marketer at a digital agency has great tools to analyze data, but one mustn’t forget the importance of human intervention. The most successful marketing will be the one that combines minds with metrics and artificial intelligence.

Very few are able to optimize LTV in Google Ads today. People are currently only optimizing against the initial revenue or static estimates on LTV.

But everyone knows that there is more to get out from it. Keywordio has created a unique solution for this. We are offering a package/landing site in which we can set up a CTA and this solution involves - 

  • Measurement and analysis of data
  • Set up of tracking for LTV within an ecommerce
  • Measuring period and proven hypothesis
  • Activation of an algorithm through data drive adjustments

 

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