Facebook’s New LTV Lookalike Audiences
One of Facebook’s most powerful offerings for marketers is Lookalike Audiences. A new roll out is taking that feature to the next level and letting you assess current and new customers by how valuable they are, value-based lookalike audiences. According to Facebook, “LTV Is a value associated with your customers based on how much and how often they spend with your business over the course of their relationship with you.”
Sure, the people who buy from you every now and again shouldn’t be ignored, but your most loyal customers (and potential customers who display similar traits) deserve special attention within your marketing plan.
The Power of Lifetime Value Metrics
LTV is one of the most important metrics for understanding and targeting your customers since it measures the direct profit your business makes off that person or account. There’s a big difference between someone who frequently buys from you but may only spend a few dollars on each purchase and someone who buys semi-regularly, but spends a lot each time. Both segments may be valuable to you in different ways at different times, but it’s important to note the contrast between the two groups and market to them accordingly.
LTV gives you a much more in-depth look at customer behavior since it can be calculated to specific time periods, including lifetime, month to month, and even to forecast. You can also use LTV to determine how much to spend on a customer that will give you the highest return, and even how to shape your product or service to keep these high LTVs coming back.
LTV is an essential factor in determining where to focus your budget and effort and should be considered an integral part of your marketing plan, not an add-on to what you may already have established.
Reasons To Use LTV Audiences
Because you’re targeting people who already know and love your product or service (or again, share traits with those who already love your product), your messaging can be much lower funnel. You can skip directly to promotion instead of spending time and money on awareness, engagement, and education. The cost for these ads may be higher initially, but LTV Audiences is a longer game since it’s based on the lifetime value of a customer. Take note of immediate numbers, but the focus should be on the weeks and months following.
Step-By-Step: How To Create a Value-Based Lookalike Audience
As with most new Facebook products, value-based lookalike audiences are on a slow roll-out, so be patient and use this time to come up with a plan if you don’t already have access.
Step 1 - Create a New Custom Audience
First, check to see if you have access to the LTV Audiences feature. To do that, in your Facebook account, navigate to Audiences -> create a Custom Audience, and select Customer File. If you are a part of the roll-out, your see an option for Customer file with lifetime value (LTV). This is what you’ll click into to set everything up.
Step 2 - Add Custom Value Column
From here, the flow will look similar to what you go through to create a normal Custom Audience, but with a few differences. You’ll see Step 2 requires you to “Include a column with a range of customer values."
When creating a customer file with LTV, be sure to follow the directions Facebook gives: use positive numbers in the same currency without commas. Make sure everything is in dollar values as Facebook uses this base information to create its own rank of your customers.
Also be sure to include a full range of customers, not just those you’ve already identified as high LTV so that Facebook’s algorithms can make their own determinations on regular LTV versus high LTV customers.
Step 3 - Confirm Custom Value Column
Facebook will ask you which column you want to use for the customer value. To create the column with a range of customer values, you’ll need to do some math on your own if your CRM software doesn’t already provide you with this information.
Step 4 - Preview and map your identifiers
Map your data to upload it. Your data will be hashed before it's uploaded.
Step 5 - Create a Lookalike Audience
Finally, click to generate your value-based lookalike audience. You’ll use this group similarly to how you would a regular Lookalike Audience, but keep in mind who you’re targeting, and what messaging would be most appropriate.
Remember, if you don’t see the results you were expecting right away, don’t halt the campaign. Using LTV Audiences is more of a long game. Let it run, then take a look at how the numbers panned out and what tweaks you can make to the next round.
Step 6 - Populate and Test Value-Based Lookalike Audience
It can take a few hours to populate your new value-based lookalike audience, but once it's ready you'll see the audience size populated. In this example, our lookalike audience size is 2,151,400 people.
Using the Data to Optimize LTV
Now that you know who your high LTVers are and where to find more people and accounts just like them, it’s time to figure out how to increase that LTV and push mid-LTV customers to the next level. Because LTV is a wholesome look at a customer’s potential, increasing LTV means a direct increase in profit.
And don’t forget the basics of marketing here – It’s much easier to sell to someone who has heard of you and bought from you than to someone who’s stumbling across you for the very first time. A focus on returning customers (and lookalike audiences who match those you’ve already had success with) is key here.
Essentially, you’re coming up with a retention strategy aimed at those customers who are already giving you the most bang for your buck, and those who show the potential to do so.
You’ll want to model a few different scenarios to figure out who to pay the most attention to now. This may mean ignoring - or spending less time on - lower LTV customers while you focus on those who are already the most engaged and earning you max profit. Again, keep in mind that data over time is the key here. Though your efforts are happening now, the more accrued information you have, the better.
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