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Do You Know Your Customer’s Lifetime Value?

DimNiko Marketing | Customer Lifetime Value

Today we’re going to talk about Customer Lifetime Value (LTV). 

Even though it’s one of the most important metrics, most companies ignore it. 

I can’t stress enough how important it is to know your LTV. 

Some of you who aren’t newbies in business, you already know how important it is to keep track of your LTV. 

But, those who are just joining, can’t answer why it’s critical to know. 

Read More: 3 Ways of Increasing Your Revenue By Communicating With Your Customers

Your LTV helps you determine the worth of your customers and allows you to make the right decisions for KPIs – especially for acquisition since you’ll understand the real costs to acquire new customers. 

It helps with maximizing the value of existing customers, determining revenue generated from specific customers, and segmenting the categories of customers by identifying patterns that your most profitable customers have in common. 

And all of the above helps with better aligning your messaging to acquire more valuable customers. 

So how do you calculate your LTV? 

There are few metrics that contribute to the calculation of CLV: 

  • Average Order Value (AOV)
  • Purchase Frequency (PF)
  • Customer Value (CV)
  • Average Customer Lifespan (ACL)

You need to look at each metric individually to understand what ones need more attention to maximize profitability. 

Generally, when doing these calculations you look back 1 year or a lifetime, depending on how long you are running your business.

  1. AOV = Total Sales Revenue / Total Number of Orders
  2. PF = Total Number of Orders / Total Number of Unique Customers
  3. CV = Average purchase value * Average purchase frequency rate
  4. ACL = averaging the number of years a customer continues purchasing 
  5. CLV = Customers Value * Average customer lifespan

This will give you your revenue you can reasonably expect an average customer to generate for your company throughout their relationship with you.

Customers Lifetime Period

It’s also good to calculate the Customers Lifetime Period, however for this you’ll need to calculate the Churn Rate as well which is a bit more complicated, but taking the simple calculation it would be:

 Dividing the total customers beginning of x period – customers end of the x period/customers beginning of the x period. 

Customer Lifetime Period = 1/Churn Rate

Knowing your customers LTV is highly valuable on your acquisition strategy. You’ll know exactly how much you can spend to acquire a new customer. 

Once you’ve calculated your LTV, the next step is to improve the number. 

To improve, you need to look at your average order value and customer loyalty. 

Customer loyalty takes time to build and depends on the business model, but there are other ways to encourage customers to spend more. 

One is to increase AOV. A few ideas are: free shipping, bundles, upsell/cross-sell. 

While increasing repeat Customers Loyalty generally reward programs work well.

I hope this post was helpful for those who never calculated the Lifetime Value of their customers. I would love to hear your opinions on this post, or your input if you are already implementing the above so those who are missing out will hear more feedback on the true values of calculating LTV. 

If you are spending over $500 a day and want to scale your brand.

Book a call below https://dimniko.com/msp-apply

Have a Great Day!

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How to Properly Track Performance with 7 Day Attribution Window

DimNiko | 7 Day Attribution Window

Hi Folks, 

Today I’m going to share a little trick that helped me optimize performance on campaigns with huge discrepancies. 

Now that FB changed it’s attribution window from 28 days to 7 days, a lot of purchases are not tracked. 

It depends on many factors: 

  • The size of the business, 
  • How long you have been running ads
  • How well you know your campaigns 
  • The performance and what you should expect 

But even if you know your Ad Account inside & out, the attribution change can still affect it, plus each quarter has different user behavior, but this is another topic.

Let’s see now how to track the performance and start learning again to deal with the 7 days attribution window.

The first thing I noticed is that it’s not a good idea to optimize based on daily performance, unless you’re hitting your KPIs. 

Solution, until you get to learn again your campaign’s behavior and know what to expect in terms of attribution you’ll need to follow closely the daily performance from day 1 to day 7 and the 8th day to recheck again. 

It is a bit time consuming but exporting into an excel spreadsheet will help to have a clear view. 

For example, on one of our clients, we noticed that the discrepancy from day 1 to day 7 was about 50%. 

Yes, it is kind of a madness in this case to optimize on the daily performance, we would have killed good campaigns. 

However keep in mind that campaigns with a higher budget for 7 days unoptimized can be a double edged sword, so pay attention to the daily budgets until you learn the new patterns. 

For this specific test I was using 2x the CPA for the daily budget. 

If you have multiple sales channels running try to understand how much of the sales came through FB. 

I know this is “mission impossible” and a never ending cycle, but actually the spreadsheet will help you to notice the discrepancy between day 1 and day 7. 

So once you have a clear pattern you’ll be able to know approximately how much sale came through FB on Day 1. 

Example: Day 1: 50 sales in Facebook’s Ads Manager  / 100 sales in Shopify
Day 7: 75 sales in Facebook’s Ads Manager 

As per the above example there is a 33% discrepancy between Day 1 and Day 7. 

We found that 75% of the total sales came from Facebook. 

I would like to encourage you to try this test if you haven’t yet, and see if it will help to better understand and optimize your Facebook Ads campaigns with the new 7 days attribution window.

Let us know if you have any questions or give us feedback if you are trying similar optimization hacks.

If you are spending over $500 a day and want to scale your brand

Book a call below:

https://dimniko.com/msp-apply

Have a great Day!

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