Customer Lifetime Value

Projects how much revenue the average customer nets throughout the time they’re a customer. The better your customer lifetime value, the less you have to spend on acquisition costs. The calculation is simple—customer value x average lifespan. However, determining these values will greatly vary based on your type of business.

Average Order Value

This is the amount of money each customer spends on each purchase with your brand. The more successful you are increasing this amount, the less you’ll need to spend on acquisition. And, customers will have a stronger affinity with your brand. The calculation for this is total revenue over 365 days/total number of orders over 365 days.

Customer Churn Rate

This should be captured as a percentage indicating the number of customers who’ve been lost over a specific amount of time. First, define a time period in which you want to keep customer churn accountable to, e.g., monthly, quarterly, or yearly. We recommend that you look at this monthly once you have a year’s worth of data to benchmark against.

To calculate this metric, take the number of customers at the beginning of the month minus the number of customers at the end of the month, divided by number of customers for the beginning of the month. The lower this is the better, since (generally speaking) you don’t want to lose customers.

Note that you should have an understanding of these three benchmarks prior to your campaigns taking flight. You can then segment your campaigns to audiences based on these success metrics, and choose to give higher bids to those likely to spend more with higher LTVs or those who may be likely to churn.