Keyword Bidding Based on Lifetime Value

For many people, bidding on keywords comes down to one thing. Squeezing as much revenue as possible out of the money they’re spending on clicks with their PPC advertising. Keyword bidding is a free flowing art, and there are no set ways to reach your goal. Sure you make decisions based on the data you have available to you at that time, but competitors can change their bids, new competitors can arise or any number of other variables can affect your spend.

But what if you threw the standard keyword bidding rat race out the window and managed your bidding strategy based on something else? Lifetime value (LTV) is the amount of money you expect a customer to give you during their total time as a customer. So if you run a business that has a monthly subscription of $20 and you know that your average customer stays with you for 12 months, your lifetime value of a customer is $240. Of course that’s a simplistic way to look at it and there are many other factors that can play into this equation like profit margins, purchase frequency and many others. It can also get trickier when trying to figure this out for an e-commerce store or websites that drive foot traffic to stores.┬áIn my opinion, whether you use the LTV of a customer to determine your bidding strategy or not, it’s something every business owner should be aware of. In the infographic below it gives a good example of how Starbucks is using LTV to determine their ad spend.

We’re working with a few of our subscription clients to determine if a lifetime value bidding strategy is something they would like to try. If you have more questions about keyword bidding on lifetime value, please contact us.

ppc lifetime value

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