LCV and profit-based bidding
Every product, user, search intent and transaction has a different value, and we want to capitalise on each combination.
Let’s take the first step. We’re ready.
Because all customers aren’t created equal
We’ve been working with clients to get more from their media spend for over 20 years. Rather than one return on advertising spend (ROAS) target based on average profitability, set specific goals that will help maximise profitability.
Data segmentation
By incorporating margin data into your data feeds, you can optimise product categories based on their margin brackets. Rather than one ROAS target based on average profitability, you can set a target for each bracket.
This ensures you never have low margin products eating up your budget with limited return, while your profit spinners gather dust on the shelves.
Lifetime customer value
Some of the people buying from you now will buy again down the line. Therefore you need to account for that future income when bidding.
By studying the lifetime customer value, we can model exactly how aggressive we can bid to win the sale while maintaining long-term profitability.
This helps to optimise for growth rather than just last-click salesmanship.
Smarter use of data to get more for your budget
Existing customers can be segmented from potential new customers within search and shopping to optimise performance.
Leading platforms such as Google now have features to allow this segmentation for new and existing customers once we have calculated the lifetime customer value and the maximum look-back window for acceptable profitability.
Understanding LCV metrics
The major metrics obtained from lifetime customer analysis include things such as:
- Average first transaction value
- Average repeat transaction value
- Average profit per customer over any period
These metrics can then be used in the following matching ways:
- Maximum bid increase percentage
- New customer acquisition value
- Repeat customer acquisition value
- Long-term profitability modelling
- Segmented campaign targets
Thinking further ahead, this would enable you, as an advertiser, to move toward value-based bidding, targeting business outcomes rather than standard metrics in platform.
How we work, works
We’re in the business of results. Take a look at our recent work, or get in touch to learn more about how we did it.
Let’s take the first step. We’re ready.
Frequently asked questions
What are LDV and profit-based bidding?
Lifetime customer value (LCV) calculates the total revenue a customer is expected to generate over their lifetime with a company. Profit-based bidding, on the other hand, calculates the value of a customer based on the profit they are expected to generate. These metrics help companies make informed decisions on how much to invest in acquiring or retaining customers.
How can I benefit from knowing LCV?
Understanding the lifetime value (LCV) of your customers can help you make more informed decisions about how much to invest in acquiring new customers and how much to spend on retaining existing ones.
By knowing the LCV of your customers, you can optimise your marketing budget and focus on acquiring and retaining customers who will generate the most revenue for your business over time. LCV can also help create targeted and personalised customer retention strategies, and prioritise the most valuable customers.
What’s so great about profit-based bidding?
Profit-based bidding can help you make more informed decisions about how much to bid for advertising or other marketing efforts to acquire new customers.
By understanding the profit potential of a customer, you can bid more effectively on advertising campaigns and allocate your budget more efficiently. Profit-based metrics also allow you to create a more sustainable and profitable business model in the long term.
