Learn Google Ads: Customer Lifetime Value

I covered this in a couple of previous sessions where most people or advertisers are calculating the first time order value and not taking into account how many times a potential client can come back to you. For example, let's say, Mark, in your case, you have a client and they come to you for business cards. They may come to you for a letter, as they may come for you too for Christmas cards, they may come back for someone else who joins the company, they need more business cards, so that account is not just a one-off transaction unless you've got a product where you only get a one time sale. Most businesses will have recurring or repeating customers. That's what you want to do, the customer lifetime value is not until when the customer dies, take a 12 month or 24 month period and see from past data if you have been running your business for a long time, how often do they come back to you?

If they come back to you on average, you know you spent a hundred dollars and they come back five times in a year, then that customer value is $500 to you, not a hundred. The name of the game is whoever is willing and able to spend the most to buy a lead or a customer will always win because we bid more aggressively. We know that our customer lifetime value is so much, whereas your competitors will just be looking at that front end transaction of only one-off and they'll think, Ooh, it cost me $50 to buy or get the customer and the sale value is $45, I made a five-pound loss straight up.

It's exactly the same way, where all these big supermarkets and other big shops have this loss leader item in their shop. They will not make a profit on it, but they know once they come in like a bar selling cigarettes, they will not make much profit. But, when you go and buy cigarettes or other low margin items, you will also go to pick up chocolates and cold drinks and all these sorts of things. That's what you want to be looking at to work out your customer lifetime value and not just a one-off first transaction.

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