ADVANCED: How does LTV effect my ROI?
The one thing that a lot of people don't think about is something
called "Life Time Value" (LTV) and is developed via a successful backend. So, how does this ultimately effect your Return on Investment (ROI) with a traffic campaign?
It's not just about that front end sale. While you may be looking at
your front end sale and saying "hey, it cost me $750 to do that mailing
and I made only 10 sales at $50, didn't I lose money??"
Well, the answer is "that depends". For starters, hopefully, you got atleast 350-400 opt-ins to your list ... those have value. Even if you assigneda value of just $1 per lead ... then that would put you at better than break even.
However, truthfully, the back-end is even more important.
Even in our example, if you have a $50 product... and youmake half of your money back on the initial sale... if you have a good funnel, some percent of those people should upsell right away to a higher priced product... and then others, over time, will buy higher ticket items for you as well.
To calculate true Life Time Value, you would look at a true 'lifetime' of purchases from a customer over multiple years. Most of our advertisers haven't been marketing for that long... in fact, most offers that are marketed are relatively new as well. So, let's just talk in terms of a 3 to 6 month 'lifetime'.
Even with this in consideration - and depending on what your funnel, the LTV can be very high. We've seen as high as $500-$800 in just 6 months! This can vary wildly from funnel to funnel since some offers also have a monthly recurring component, others rely on phone sales, some have events, etc etc.
So, let's be conservative and say that every customer is worth just $300 profit to you over the next 6 months. And let's say it 'cost' you $100 to make that first $25 or $50 sale.... What we're basically saying is that for every $100 you're investing in your business, it's going to return you $300 or more in the next six months.
So... the big question becomes... "How often would you like to invest $100 in your own business for a $300 return in the next six months?"
Now, keep in mind, this is just an *example*. Your sales funnel may return more, it may return less. The cost of acquiring a customer may be more in your business or it may be less. But this is a good basic explanation of "Life Time Value" (or LTV) to help you determine your long term returns.