Questions

I know with my "best" and "average" customer LTV that my current cost per acquisition (CPA) is good. However, if I was just looking at my "worst" customer LTV the current amount I'm paying in CPA is way over. How do I judge what I should be spending on advertising based on these 3 LTV segments (best, average, worst) I have for my customers?

Just as you're averaging CPA across all the customers you're acquiring, you should also be looking at your average customer LTV and using that to determine the strength of your overall CPA.

That said, if you have the data to be able to break down CPA by best, average, and worst customers AND can see the source of each of these customers, you may be able to glean some insights around which sources or campaigns yield the best and worst customers. (For example, if your highest-CPA and lowest-LTV customers are mostly coming from AdWords, you should focus your budget/efforts on a better-performing channel.) This will help you cut out high CPA channels and generate higher-quality customers, thereby reducing your average CPA and bringing your ROI up.


Answered 9 years ago

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