When you’re running a paid search advertising campaign, it’s important to understand the lifetime value of your customers. What is “customer lifetime value?” CLV is “the dollar value of a customer over the entire duration that they are a customer.” In other words, it’s the total amount of money that a customer spends with you. Measuring CLV can help you make smarter decisions about where to allocate your marketing dollars.
But why is customer lifetime value important to your campaign and your business? It’s time to get serious about CLV – here’s why.
CLV: How Does it Work?
There is one metric that will trump all others when it comes to making decisions about your paid search campaigns: customer lifetime value, or CLV.
CLV is the total amount of money that a customer spends with you over the course of their relationship with your business. This includes not only the initial purchase, but also any repeat purchases, upsells, and cross-sells. In other words, it’s the net value of a customer to your business.
Your Most Important Metric
Why is CLV so important? Because it allows you to make decisions based on data, rather than gut instinct. When you know the lifetime value of your customers, you can make informed decisions about where to allocate your marketing resources.
The Top 5 Reasons to Measure CLV for Paid Search Campaigns
Lower CPA: When you know the lifetime value of your customers, you can be more aggressive in your bidding.
Optimize Bids Within Your Funnel: By understanding the value of each stage of the customer journey through your particular sales funnel, you can optimize your bids to maximize ROI.
Spur Long-Term Growth: Customer lifetime value is the best predictor of future growth. By understanding CLV, you can make decisions that will lead to sustained, long-term growth for your business and bottom line.
Calculate Campaign Effectiveness to The Cent: When you’re measuring CLV, you have a complete picture of your campaign’s effectiveness. This allows you to make adjustments on the fly and ensure that you’re always getting the most bang for your buck.
Improve Customer Retention: Keeping your customers happy is key to maintaining a high CLV. Measuring CLV can help you identify areas where you need to improve customer retention and lower churn.
Take the guesswork out of your campaign – calculate your CLV down to the penny.
The formula for CLV is:
CLV = Customer Value (average order spend x number of orders in a year) x Average Customer Lifespan (in years).
To ensure this is accurate, you should be tracking their metrics all the time, as well as your customer turnover rate. With accurate data, you can calculate CLV over any timeframe whenever you want.
Improve Your CLV Now
There are some key steps you can take right now to improve your CLV and keep the number growing:
- Deliver more than expected
- Boost average value order
- Use deep research for internal data and market research
- Listen to customers to discover true business drivers
- Add value through user experience
- Maintain client relationships past the customer acquisition
- Make onboarding new clients a priority
Boost Your CLV Immediately With a Paid Search Marketing Company
With all the day-to-day, boosting your CLV is best left to a professional. A paid search marketing company like WSI understands why customer lifetime value is so important.
Book a consultation with Heidi Schwende, and boost your CLV immediately.