With AI and automated bidding on multiple platforms, you must fight for every sale at every part of the purchase path. The traditional concept of Customer Lifetime Value driven CPA targets is outdated in this environment.

1. this is the unit.com
Why The Lifetime Value
Model is Broken for
Ecommerce

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The Great Debate -
Lifetime Value
Vs
Transactional

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The Level of Competition Matters
Low HighCompetition
Lifetime Value
You front load your ad
spend to acquire
customers who can be
retained mainly using
email marketing. Some
companies don’t budget
for further ad spend
to retain these
customers.
Transactional
You have to fight for
every sale.
Competitors are
aggressive and
customers bounce from
site to site for the
best deal.

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The Level of Competition Matters
Low HighCompetition
Lifetime Value
“When they buy once,
they will keep coming
back”
Transactional
“If you are not front
of mind from
consideration to
purchase you lose the
sale”

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The Machines Have
Made it This Way

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Retargeting and Big Data Ad
Tech Creates Competition
for Each Interaction Along
the Customer Journey.
... and you gotta pay for
it!

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Search Social
Programmatic
Display
Video
Customer Acquisition
and Customer Retention

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Consideration Research
Value
Comparison
Purchase
Multiple touch points are now
opportunities for companies to gain
control of the customer conversion
path.
Customer Purchase Journey

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Ok, so how do we know
if we are doing a good
job?

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As a Marketing Manager
you can move from NPV
(Discounted Cash Flows
of future customer
revenue) to
Annualising Daily
Advertising Returns.

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How To Appraise Performance
Customer Lifetime Value
CLV = Future Revenue - Future Retention Costs - Ad Spend
See where this falls down?
You can’t predict your future retention costs in a machine
learning AI world!
You simply don’t know what your competitors will do (or
what you will do for that matter).

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How To Appraise Performance
Transactional (Daily)
So to get this to work practically and also to get
board-level buy-in taking a daily approach is best.
[(Daily Return + 1)365
-1] X 100
You Daily Return is:
Sales - (Ad Spend + Fulfillment Costs + Expected Goods
Returned)/ (Ad Spend + Fulfillment Costs + Expected Goods
Returned)

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How To Appraise Performance
Transactional (Daily)
£1,000 Daily Return of 0.4%
for a Year.
ROI 329.34%
£329,343
Start of Year End of Year

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A bit like the old
rice on a chessboard
story.

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Set your Annual Return
on Investment for your
advertising spend and
use the Daily Return
to monitor progress.

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Hire a Quant and Data
Scientist if your CEO
wants more granular
attribution data. (it
really is that
complicated)

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Pros and Cons - Transactional Approach
Pros
● No Guesswork - Predicting the Future
● Works well with Automated Bidding tools
● Is well suited to the move to micro
conversions.
● Is flexible
● Is a true representation of how advertising
works in the “always-connected” age.
Cons
● Requires high volume sectors to drive
profits.
● Correlation and causation are not fully
understood.
● Short-term thinking. Future cross-sell and
upsell not factored in.

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Pros and Cons Lifetime Value Approach
Pros
● Long-term thinking - full value of a
customer
● If you have cash reserves it can be used
to push smaller competitors out of PPC
auctions
● Factors in cross-sell and upsell
Cons
● Dependant on CRM
● Can’t fully predict the level of competition
or competitor actions in future
● Major Ad companies like Google and
Facebook have Ad Tech that takes the
battle for retention away from you and
onto their bidding platforms
● Not suited to an always connected world
● Doesn’t fully factor in the costs to
re-engage customers on third-party
platforms.

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Is the transactional
approach right for
your business?

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“If you want to have a chat on how you can
grow your ecommerce business through digital
marketing just drop us a line. We can help
from top-level planning and budgeting to day
to day management of your digital
advertising” Paddy Casey, Co-Founder, The
Unit.
Drop us a line