35: Do you Know your Customer Lifetime Value- you need to. :)

Summary

In this episode of Facebook Ads Quick Tips, Stacy Covitz emphasizes the importance of understanding lifetime customer value and average order value for effective ad spending. She explains how knowing these metrics can transform perceptions of ad profitability and guide smarter marketing strategies. By tracking average purchase values and customer behaviors, businesses can optimize their ad spend and improve overall profitability.

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Transcript

Stacy Covitz (00:10.51)

Why you have to know your lifetime customer value. Hi friends, welcome back to Facebook Ads Quick Tips with Stacy Covitz. That's me, your meta ad strategist for online coaches and course creators.

And today we're talking about one of the most overlooked in my opinion, at least from my experience and probably most important when you're thinking about ads is your customer's average purchase value. And we'll take that one step further and say lifetime, your average lifetime. Lifetime average, average lifetime.

purchase value. So before you glaze over, stay with me. This number is the difference between I can't afford ads or wow, ads are actually profitable. I'm actually making money to use ads.

So sometimes your average order value is AOV. It's simple. It is your total revenue divided by your number of purchases. So we're talking digital products here or a low-cost digital product, which I talked about in the last episode with

and upsell or in the hopes of getting them to become a client in your high ticket coaching program, your $5,000 program, your $10,000 program.

So pretty simple math, right? But here's where it becomes a game changer. When you know that number, you suddenly see how much you can safely spend to get a customer and still make money. If your average customer spends $100, and we're just going, we're not even saying lifetime for this example, we'll just say,

One one-time customer spends $100 and it costs $25 to get them through your ads. You're not losing money on ads. You're actually buying a $100 customer for $25. That's the kind of clarity business owners with steady growth always need to have.

So why most people miss this? Here's what happens, and I see this all the time. Someone will run ads for $27.

Here's what happens and I see this all the time. Someone runs ads for a $27 product. They get a few sales and they say, ugh, ads aren't working. My cost per sale is $20 and I'm only making $7. But what they're not tracking is that 40 % of those buyers

went on to buy something else, a $97 upsell, a coaching session, a template bundle, whatever the next thing is, suddenly their real average cost is not $27 anymore, it's like $60 or even $100. And add that on to lifetime.

Right? Because now that person is on your list. This is what I talked about last week. And your list is filled with buyers. So chances are if they bought from you before, they'll probably buy from you again.

So how do you find your real number? It's very easy. Pick a time frame, the last 30 days, 60 days, that works great. Total up all the sales revenue, Stripe, PayPal, ThriveCard, whatever you use, and divide by the number of unique orders or customers. So for example, $5,000 of revenue divided by 50 customers equals $100.

average purchase value. If you have multiple offers, find this for each one and your overall average.

This is how it changes your ad strategy. You can plan smarter ad budgets and even decide which offers can afford paid traffic. When you know your average purchase value, you know your maximum cost per acquisition. So what can you go up to to actually pay for a sale?

You can, it helps you decide if you're going to optimize for sales or leads.

and you can spot which products will actually pay for your ads.

)

now.

your average order value isn't a one-time number. It's a fluid. Track it monthly, quarterly, especially if you add upsells, bundles, or you change your pricing. Even small changes like offering order bumps or free shipping will increase your average order value. So here's a quick recap.

Your average purchase value equals your total revenue divided by total number of orders. tells you what a new customer is really worth. that sounds mean. It's not what they worth as a person, but their money. And knowing this turns ad costs into investments, not guesses. And track it regularly and use it to make smarter budget calls.

Thanks

If you, if this is confusing or intriguing and you do have a low cost digital product or you don't know your average order value, you can always set up a call with me. offer 15 minute free discovery calls and we can have a quick look. And I thank you so much. Thank you so much for listening and I will see you next time on the Facebook ad quick tip podcast.