Efficient Growth Tips: LTV and Profitability on Meta
Facebook and Instagram ads certainly have the potential to create a higher lifetime value of your customers, but it doesn’t make sense to approach the advertising platform without some background on what’s working. If you’ve been advertising for a while, and the results have been lackluster, consider these best practices and tips to improve how efficiently you're growing on Meta.
What is a customer lifetime value (CLTV)
Sometimes called LTV, the customer lifetime value (CLTV) is measured as the net profit you think you can get from a single customer over a lifetime. It includes how often they buy within a cycle, how much they spend each time they make a purchase, and how long they remain a customer. If even one of these factors moves in the right direction, your LTV can skyrocket, but no one factor is more important than the others.
With Facebook and Instagram (Meta), specifically, you may find a formula that works best for your business, just for these platforms. Consider how you want to measure LTV before you begin tinkering with your ad campaigns. Disappointed in your ad results? Try these tactics for improved profitability.
1. Help your customer get to know you better
Customers will only get the full value of your product (and continue using it) if they understand what they are buying. Ideas for boosting this opportunity include creating ads that also serve as educational content for your customer after they buy. When a customer knows more about how something works, they are more likely to use it correctly and appreciate the value it brings to their lives. By advertising in a way that helps customers "get" you and your brand, you can boost overall LTV for that product line.
2. Use value-based Lookalike Audiences
If you’re not already taking advantage of first-party data (1P), you may be missing out. This information is ideal for creating Lookalike Audiences of those who may not be familiar with your brand but match the demographics of those who already know and live it. Look-alike Audiences are preferred over generic categories based on age, location, and interest, which require you to guess the common denominator among avid buyers.
3. Condense advertised product offerings to those that create high LTV
One common mistake is to advertise only your cheapest product or service with the thought that it creates a lower barrier to those purchasing for the first time. While it can drive an initial sale, it doesn’t guarantee future sales, which can contribute to a lower LTV.
Instead of promoting low-cost products through low-priced bids, consider boosting your premium products, which may attract those with higher user intent to spend more over their lifetime. While the customer acquisition cost (CAC) may initially be higher, the LTV to CAC ratio should improve; the customers you attract may be more in line with what you need to create a loyal fanbase of eager buyers for your more expensive products.
(Note: Quality data is needed to create these opportunities, so be sure you are the tools available to collect user data.)
4. Consider adjusting to a predicted LTV bid
Another useful tactic is to use a dynamically or manually set revenue based on the predicted LTV as the value for a purchase conversion event. This bid should be based on your target LTV:CAC ratio. You’ll be able to bid more aggressively toward users with a specific propensity to be qualified or behave like a high-value customer. It also feeds the platform algorithm with more data, which is especially relevant when a product or service's LTV grows significantly past the first 30 days.
How do you do this from the Meta ad platform? Start by adjusting the product value on a new event, then create a purchase and a “pLTV purchase” to test it out. You may have to adjust the product value manually via a tagging tool like Google Tag Manager and a look-up table. (These tables use the product name as a key for the input variable and use the output value as the "purchase" value.)
Then, you simply add this value to a duplicated Facebook or Google tag and begin using them for reporting or even testing them as an optimization event.
Bottom line: Because of certain uncontrollable factors, such as geography, subscription length, or product type, LTV can vary significantly. You may opt to dynamically change your output value based on these conditions. These factors must be denoted in your data layer, so you can then build a function that will reference these variables and return a dynamic value that's used in place of the transaction amount.
If all of this seems a bit too technical, it may be time to enlist the help of an expert. Bamboo keeps implementation and calculation simple for you by doing all the heavy lifting. Your LTV can most likely improve with some ongoing testing of your current Meta ads campaign, and we would love to help you meet those LTV goals.
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