• How do you determine your customer lifetime value?

• Too many advertisers simply look at what is generated on the front end and how much they are spending to acquire this customer, and that's it.   They don't really look at whether or not this person that's goes onto their email list, whether they're a buyer or non-buyer in the very beginning, ends up buying more items down the road and that is a huge mistake. 

• You have to remember that just because a customer has bought one item from you or maybe they've been on the list for a year and maybe they haven't bought anything just yet, It doesn't necessarily mean that they may not buy something later.

• What about the people who have bought something from you and then bought another item and then another item, and then another item? Do you actually know the lifetime value of that person when you are developing your ad campaigns? 

• It's not just about whether or not they buy something. The moment you advertise to them the first time, yes. Getting someone to buy a course at $300 or a thousand dollars or buy coaching from you for $10,000 is fantastic. But are you able to get them to buy something later? Whether it's a month later, three months later, six months or 12 months later, because at the end of the day, that'll allow you to adjust your budget based upon how long it takes for them to buy a second or third item. 

• Example, I have a client of mine who knows that the moment someone is on his list, it takes them as long as 21 days to purchase something on average, the purchase cost of this item is $97. So they know that they can spend upwards of $97 to acquire a customer. So even if a lead is costing them 10, 20, $30, not only do they know how many leads they need to acquire that $97 purchase, but they also know how long it takes to get to that person to buy. 

• So of course they don't want to get a lead for $30 - no one does - but if they knew that that $30 lead has a high probability of buying a $97 item, and let's just say it, 30% of their leads end up buying well, they can do the math and figure out that one in three, possibly one in four leads will buy a $97 product. 

• And they also know that that $97 purchase, let's say 10% of them upgrade to something that's $500 or more. So when you were determining your customer lifetime value, that also allows you to see how much you can afford to spend not just on lead, but how much you can afford to spend for someone to eventually buy from you down the road. And that'll open up a lot more possibilities for you in advertising when you first start, 

• If you can figure out just how long it takes to buy, how much they end up buying, and how often they plan to buy, you can calculate beyond that initial purchase. 

• So if you're generating lots and lots of leads, you need to see how much your leads are not only costing you, but how much each lead is worth. And that's going to allow you to develop that customer lifetime value and spend a lot more at scale for your campaigns. 

David (00:00):

Hey everyone. Welcome back in this video. We're going to talk about customer lifetime value, no ad account to look at today. Let's just talk straight numbers here. Now, a lot of you are advertising product, whether it's a low ticket item, $7, $24, $57. Some of you are advertising something that's $10,000, $5,000 thousand dollars, but many advertisers simply look at what is generated on the front end, right? What's the initial purchase price. How much are we acquiring this customer for? And that's it. And then after that, they don't really look at whether or not this person that's put onto their email list, whether they're a buyer or non-buyer in the very beginning, ends up buying more items down the road. And that is a huge mistake. So consider this when you have, let's say a sales funnel that you were looking to acquire some leads first, before maybe buying a product, whether it's they get on a webinar, maybe they buy a template pack from you, or they buy a course for $500 or they sign up for coaching with you at $5,000.

David (00:57):

You have to remember that just because they've bought one item for you from you, or maybe they've been on the list for a year and maybe they haven't bought anything just yet. It doesn't necessarily mean that they may not buy something later, but what about the people who have bought something from you and then bought another item and then another item, and then another item. Do you actually know the lifetime value of that person when you are developing your ad campaigns? It's not just about whether or not they buy something. The moment you advertise to them the first time, yes. Getting someone to buy a course at $300 or a thousand dollars or buy coaching from you for 10,000 is fantastic. But are you able to get them to buy something later? Whether it's a month later, three months later, six months or 12 months later, because at the end of the day, that'll allow you to adjust your budget based upon how long it takes for them to buy a second or third item.

David (01:49):

As an example, I have a client of mine who knows that the moment someone is on his list, it takes them as long as 21 days to purchase something on average, the purchase cost of this item is $97. So they know that they can spend upwards of $97 to acquire a customer. So even if a lead is costing them 10, 20, $30, not only do they know how many leads they need to acquire that $97 purchase, but they also know how long it takes to get to that person to buy. So of course they don't want to get a lead for $30. No one does. But if they knew that that $30 lead has a high probability of buying a $97 item, and let's just say it, 30% of their leads end up buying well, they can do the math and figure out that one in three, possibly one in four leads will buy a $97 product.

David (02:40):

And they also know that that $97 purchase, let's say 10% of them upgrade to something that's $500 or more. So when you were determining your customer lifetime value, that also allows you to see how much you can afford to spend not just on lead, but how much you can afford to spend for someone to eventually buy from you down the road. And that'll open up a lot more possibilities for you in advertising when you first start, or when you're at a point of scale, especially if you know that they will eventually buy from you. Because then that means it opens up, not just the pocket book, it opens up the bank account to a lot more possibilities for you. If you can figure out just how long it takes to buy how much they end up buying and how often they plan to buy. I hope that helps you out. And remember, always calculate beyond that initial purchase, especially if you're generating lots and lots of leads, you need to see how much your leads are. Not only costing you, but how much each lead is worth. And that's going to allow you to develop that customer lifetime value and spend a lot more at scale for your campaigns.