Lifetime Value Helps an Ecommerce Company Drive Revenue and Customer Acquisition
We wanted to show our ecommerce client the true value of their paid search campaigns.
By tracking lifetime value (LTV), we helped estimate the average revenue a customer generated throughout their lifespan.
For years, Workshop Digital has been the chosen digital marketing agency for an ecommerce retailer specializing in luxury goods and jewelry. Historically, our client’s goals have been two-part:
- Drive online orders and revenue
- Grow their customer base
To that extent, one of our client’s main key performance indicators (KPIs) is new customer sign ups—and we’ve seen consistent volume and growth throughout the years. However, as our client’s trusted partner, we wanted to help them grow their business as a whole.
As a small ecommerce team, our client faces challenges inherent in their industry. In addition to capturing quality leads and converting shoppers into paying customers, ecommerce companies must keep a watch over their ad spend. Therefore, return on ad spend (ROAS)—which helps attribute every ad dollar spent to a specific source—has been an essential metric for our client.
In 2019, paid advertising drove nearly one million dollars in sales (just more than $980,000). However, as a true extension of their small team, we wanted to do more than increase orders and revenue. We wanted to bring in new customers and show the LTV of our digital marketing campaigns.
Our efforts have historically centered on driving branded search. And at the beginning of our engagement, we focused heavily on maintaining spend in this branded space. However, as part of testing new campaign types and ideas, we wanted to expand into the non-brand space to grow our client’s customer base.
To do so, we knew we had to prove the profitability of this strategy. While providing our client their ROAS helped us show results on a campaign-specific level, it did not provide much insight into long-term growth and opportunities. Our client was interested in tracking diminishing returns, which was hard to fulfill with a metric like ROAS.
To focus on sophisticating and growing the account over time, we began tracking LTV, which helped estimate the average revenue a customer generated throughout their lifespan. In addition to showing which campaigns drive long-term profits, LTV also helped display budget caps—which helped us reallocate ad spend to other campaigns. Ultimately, LTV gauged the true return on investment (ROI) of paid search.
After implementing LTV in late 2019, we’ve been able to increase ad spend and track a more sophisticated account of success. In fact, February 2020 was the highest budget our client has ever worked with—and it ended up being our most successful month for revenue generation at nearly $100,000. We also saw record-high numbers for new customer acquisition that month, with more than 1,000 new customer sign ups, a 40% increase in year-over-year numbers.
LTV has also provided oversight into which campaigns drive long-term profit. ROAS percentage was nearly 300% in February 2020 and nearly 275% since incorporating LTV reporting (which includes an 11% improvement in non-brand ROAS year-over-year). Plus, average orders per account saw improvement, as we’re now averaging more than one order per account.
Workshop Digital now helps our client project their long-term budget, using tactics such as LTV to inform our recommendations. We’ve taken LTV out of the industry zeitgeist—and turned it into a tangible concept that enables our client to see the true value of their customers. Ultimately, this has helped our client see the impact of paid search advertising over time.