Marketers operate with limited budgets that often stretch across acquisition, retention, content, webinars, events, branding, social media, and more. Individual customer lifetime value metrics are one of the most effective ways to optimize your marketing budget in real time.
This lesson provides budgeting strategies for:
- Acquisition campaigns
- Retention campaigns
- Content marketing and webinars
When building acquisition campaigns on Google and Facebook, you can optimize your campaigns based on the predicted lifetime value of your new customers.
You can use lookalike or similar audiences to attract high-value customers. Beyond these value-based lookalikes, you can employ value-based bidding. This allows you to spend more to acquire higher value customers and less for lower value customers. Even low CLV customers are worth acquiring, as long as you don’t spend too much money on acquisition.
The metric you should use to set your spend limit is your CLV to CAC ratio. By setting a budget in this way, you can ensure you won’t spend more money acquiring a customer than they are worth to your company over their lifetime.
The exact CLV:CAC ratio depends on the competitiveness of your market. If you are facing strong competition, you may need to spend almost as much to acquire your customers as their total LTV. In this case, your ratio might be 1.5:1. If there is less competition or you want to prioritize profitability, you can use a ratio like 4:1.
Once you’ve removed wasteful ad spend, it’s important to keep testing. Find out what ads resonate with your high value lookalike audiences. Tailor your ad copy and design to attract high CLV customers, instead of producing generic ads that will appeal to a wider audience.
Once you know the customer lifetime value of each of your customers, you can adjust your retention strategy accordingly. To make the most out of your budget, follow these recommended steps:
- Stop retargeting ads to your highest value customers. These customers will likely convert again without an ad or promotion.
- Use email as a channel to engage with high value customers to save costs
- Retarget your mid-level LTV customers to incite a repeat purchase
Ultimately, optimizing your retention budget requires individual-level metrics. If you know the predicted churn date for each of your customers, you can personalize the timing of your campaigns accordingly.
With a sophisticated predictive CLV model, you can determine what features and behaviors positively impact lifetime value.
As your business grows, keep track of your customer journeys.
- What paths are high CLV customers taking?
- What types of products are they purchasing first?
- What ads are they engaging with?
- What channels do they use to purchase?
If you know that customers who purchase a certain product first are of higher value, you can adjust your website and outbound marketing to more prominently feature that product. If high CLV customers purchase through mobile, allocate more of your budget to that channel.
With individual level customer lifetime value metrics, it’s easier to optimize your budget across acquisition, retention, and outbound campaigns. Personalization, value-based bidding, and revised customer journeys can help eliminate wasteful spending.