Join Viveka von Rosen for an in-depth discussion in this video CLV - Customer Lifetime Value, part of LinkedIn Advertising Fundamentals.
- In Elizabeth Marsten's Pay-Per-Click Fundamentals course in the Lynda library, she points out that it is really important to set a budget you're comfortable with and that is realistic. I wanna cover some of her talking points before moving on to understanding bid strategies. Elizabeth has the analogy that your PPC ad is a little bit like a game of craps. You decide how much money you wanna work with and when it's gone, it's gone. You don't keep throwing good money after bad so it is crucial that you have a strategy, a clear idea of your audience and what it costs to convert them and if it's worth the ROI, the return on your investment.
As Elizabeth points out, your budget depends entirely on how much you can afford to spend to get one sale. First of all, what's the CLV, the lifetime value, of your customer? If you don't know this, you probably don't know how much you should be spending. And by the way, "what my marketing director gave me" is not a good enough answer. So, let's look at the math. Very simply, CLV is the cost of your product or service times how many times it's purchased by the same customer.
You have a big box item that costs $25,000, say a car. And on average your customer buys three cars from your dealership in a lifetime. It would appear then, that your customer CLV was $75,000, woohoo! Now, realistically, your net profit on that car is $3,000, so three cars means a net profit, or your actual CLV, around $9,000. So if you convert just one new prospect into a client running a $10,000 ad campaign, you're actually in the hole $1K.
But, if your spend is only $2,000 on, say, mixed text ads and sponsored ad campaigns, then you'd probably wanna duplicate your campaign often. So that's physical product, let's look at some digital product and what that might mean. So, if, like Yuri, you have a freemium offer, getting people to sign up for your app to upsell them, then you need to take a look at those numbers too. You might get a thousand people trying out your app because of the ad you ran, woohoo! But only 10 of those people buy the $1 a month upgrade and since the average life of an app is less than 20 months, you're looking at about $20 per person or a $200 gross profit and that doesn't even include developer costs.
So probably not worth the $500 you spent on text and sponsored ads. But someone from Inc. Magazine saw your ad, tried your app, loved it and wrote an article on you! Your downloads blew up, 10,000 people downloaded it and 5,000 people upgrade and now you've got huge ROI. The problem with this scenario, it doesn't happen that often and when it does it's really hard to track. So once you know the gross and net CLV of your customer and you know what the CPC or the cost per click, or the PPM, the payment per mille, of your campaign is, as long as you can track where your leads come from you will know whether to keep investing, maybe even to upgrade into the LinkedIn Marketing Solutions 25k club, or should you cut your losses and turn your ad campaign off? Now, speaking of tracking where your leads are coming from, especially if you're focused on CPC, then you must create unique tracking links, or UTMs, so that you can see where the different leads are coming from.
So Google Google Analytics URL builder to create free trackable UTMs, it should look like this. Now, what I love about this is that with this URL builder, you can create unique URLs, unique weblinks that you can put in your LinkedIn ads so that you can track them in a more effective way. Of course you're gonna get great analytics from your LinkedIn ads, but they're only gonna tell you where your audience is going to. You need these UTMs, you need these unique links, to see where you audience is coming from.
So, if you're split testing, use these UTMs for your ad destination. Now, if you wanna learn more about CLV, or customer lifetime value, check out this great blog by HubSpot. So you can just go to blog.hubspot.com and type in Ecommerce CLV. This is a great ad, not just for Ecommerce CLV, but for physical product too, it's recommended reading. So, we've given you some tools, now you need to know your numbers in order to start investing and tracking your ad spend wisely.
Up next, we'll talk about understanding bid strategies.
- Understanding LinkedIn ad options
- Budgeting strategies for Sponsored Updates
- Targeting text ads
- Targeting new audiences
- PPC vs. PPM big strategies
- Enterprise marketing with Sponsored Groups, Sponsored InMail, and Lead Accelerator