Briefing

Category

Media

Date posted

22 Jan 2024

Read Time

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Are you overvaluing your customers?

Customer Lifetime Value (LTV) has long been the north star for conversion value optimisation. But it’s important to know the difference between the two:

Conversion Value: How much is each conversion worth?

LTV: Over a lifetime, how much is a customer worth to your business?

Notwithstanding the ethical considerations, using LTV as a direct substitute for conversion value comes with two main issues:

  • Overspending on already loyal customers
  • Double-counting repeat conversions

LTV has clear merit, but how do we overcome these blockers?

Incremental Lifetime Value.

How much value is paid advertising really driving?

An often overlooked component of incrementality is conversion value itself.  

A more appropriate landing page might successfully drive a higher value conversion, but what if this conversion was going to happen anyway? 

The nature of paid advertising allows us to usher a consumer journey with some precision, and this has obvious value.

However, we can quite quickly, and all too easily, overestimate the worth of paid advertising when optimising towards LTV. 

Is it accurate to assume that paid activity is the sole driver of a customer’s lifetime value?

Keep an eye on incrementality

We always advocate pursuing auction competitiveness by leveraging LTV. However, caution is advised – let’s not overshoot and start overvaluing our customers.

Keep an eye on incrementality. LTV should complement, rarely replace, conversion value.

A cohesive stream of communication between the media buyer and data analyst is crucial. 

Media activates, data validates. 

If you’re not already discussing incrementality or want to delve deeper, reach out to us!