If you sell a consumable product on Amazon, and your customers buy from you regularly, you need to identify your Customer Lifetime Value (CLV). In this blog, I explain what your CLV is and the ways this number may completely change how much you’re willing to pay to acquire a new customer. Keep reading to learn how to master your Amazon Customer Lifetime Value so you can win and beat your competition on Amazon.
First, before we get into the nitty-gritties, let me introduce myself. My name is Ian Smith with Evolve Media Agency.
What We Do At Evolve Media Agency
We help Amazon sellers optimize their Amazon listings with photos, videos, copywriting and get their listings converting as high as possible. You can hire us to do product photoshoots, video shoots, marketing both on and off Amazon, Email Marketing and run your Google Ad campaigns. Also, we can get your Amazon data and Instagram user data, and then market directly to your current and potential customers.
Schedule A Free Strategy Call With Us
If you want to book a free consulting call with us, then head over to evolvemediaagency.com. And if you want to optimize your Amazon listing on your own, we’ve got a great Amazon listing checklist for you at zonchecklist.com. We broke down all the different sections on an Amazon listing page and created different sales strategies for each. You can check off as you implement the different sales strategies.
What is Amazon Customer Lifetime Value (CLV)?
Customer Lifetime Value (CLV) is the secret ingredient that enables sellers to manage their customer acquisition costs and build customer relationships. Understanding the average Customer Lifetime Value associated with your different products gives you clairvoyance into future customer acquisition costs. According to Marketplace Pulse, advertising cost on Amazon is up 30 percent from the start of this year and over 50 percent year-over-year. It is now more practical to pay more on PPC ads to outbid your competition to acquire a customer.
There are many benefits associated with leveraging your CLV. Especially when it comes to investing in Google search ads, building landing pages, and overall marketing strategies. For example, you can invest more in branding ads to increase your organic ranking to drive more organic sales. It is logical to acquire customers at a loss, knowing you’ll make profits at a defined period that fits within your risk profile and Break-Even ACoS.
How to Find Your Customer Lifetime Value
One tool which helps you find your Customer Lifetime Value (CLV) is Nozzle. It links up with your Amazon account and figures out your CLV based on your Amazon customer data. They are a trusted Amazon partner, so there’s little to worry about security-wise. Nozzle can determine your CLV over various time intervals; one month, three months, six months, nine months, and twelve months. Visit nozzle.ai if you want to learn more about the tool. Sign up for their 14-day free trial and find out your CLV based on your Amazon sales and orders.
Leveraging Your Customer Lifetime Value and Break-Even ACoS.
Suppose you have a total revenue of hundred dollars ($100), you subtract your Cost of Goods, say sixty dollars ($60), then other charges, say ten dollars ($10). The remaining balance, thirty dollars ($30), that could potentially go towards ads would be your Break-Even ACoS (Advertising Cost of Sale) in this situation.
Break-Even AcoS = Total Revenue – (Cost of Goods + Extra Fees & Charges)
Now, let us consider that this single ad acquires a customer who will buy your product four times – your customer’s lifetime value. The first purchase is the paid cost of advertising to win the customer. For the subsequent three times, you’re ideally not going to pay that cost of the ad. If they bought once, you would pay a hundred and twenty dollars ($120) to acquire that same number of purchases. And your Break-Even ACoS becomes a hundred and twenty dollars ($120).
The latter is not an ideal situation. You don’t want to spend a hundred and twenty dollars ($120) to acquire a customer. But it helps you understand your Break-Even ACoS to acquire a customer who buys from you without subsequent purchases.
These values give you insights into how much to spend to earn a customer; what one customer is worth to you. You can bid more competitively while still making sure that you make a profit; whether long-term or short-term.
These numbers also help you determine how much profit you can make per your cost of advertising.
Hopefully this was helpful to you and you learned how to master your Amazon Customer Lifetime Value. I hope you got some insight into how to use your CLV to adjust advertising costs. This should help you increase your revenue and be more competitive—especially in your PPC campaigns.
Again, if you want to book a free call with me to discuss your Amazon business, go to evolvemediaagency.com. Thank you for reading!