Understanding Lifetime Value (LTV) and Google Shopping

It is important for companies to understand the lifetime value (LTV) of their customers through marketing channels. When analyzing the LTV of their customers, some companies may find that those acquired with low customer acquisition costs (CAC) result in one-and-done customers or low LTVs. Google shopping is often a culprit for this, leading to an unbalanced mix of advertising channels. In this blog, we'll discuss why this happens and how to diversify your advertising mix.

Google Shopping as a Bottom-of-Funnel Customer Channel

Google shopping is what we call a bottom-of-funnel customer channel. This means that it attracts customers who may already have a buying solution but are price-shopping for the best deal. They tend to move from one retailer to the next based on price and retailers get into a discounting frenzy to maintain customer growth in google. This leads to zero growth as one is not expanding the market but only competing for the same customer.

Diversifying Your Advertising Mix

It does not mean that you should remove google from your mix entirely; rather, you should seriously consider diversifying your advertising mix by looking at different channels such as TV, Display ads, and social media platforms. These channels allow you to reach out further up the funnel and connect with potential customers before they even think about making a purchase decision. Additionally, investing in mid-funnel channels such as retargeting ads will help nurture those prospects until they are ready to make a purchase decision.  By doing so, you can attract new customers who are more likely to be loyal and contribute higher LTVs over time

Ultimately, it is important for any business owner or CMO to understand their LTV by marketing channel so as to better inform their decisions regarding which channels should be invested in or cut back on accordingly.  While Google shopping can be an effective way of acquiring customers at a low CAC, it can also lead to one-and-done customers or lower LTVs if not monitored closely enough. Therefore, it's crucial that businesses diversify their advertisement mix by investing in other channels such as TV and CTV in order to expand their reach further up the funnel and acquire new loyal customers with higher LTVs over time.  One other tip, consider a Multi-Touch attribution platform to understand customer attribution beyond last-click attribution which always favors the bottom of the funnel or Google.

Let us know if you are ready for your next phase of growth.