As we start sharing on how business can use Facebook Advertising to grow their business, one key question eventually arise. Will advertising on Facebook really generate ROI for my business? The answer is Yes… And No…

It all depends on your customer lifetime value. Your Customer lifetime value or CLV for short is the acculmulation of all the products they will buy from you in your lifetime.

CLV = Average Value of Transaction x Number of Repeat Purchase

And why is this important? Because this will greatly affect how much you are willing to spend to acquire that customer!

Imagine 2 competitors doing the same business:

Competitor A is a master of customer lifetime and is able to upsell, downsell, cross-sell. His average customer lifetime value maybe worth SGD10,000. To acquire this customer, he can easily invest SGD1,000 and profit SGD9,000

Competitor B on the other hand, does not consider extending his Customer Lifetime value. And his average customer is worth SGD2000. To acquire this customer is only willing to spend SGD200.

Comparing a marketing investment of SGD1,000 and SGD200 for the same industry… Who do you think will eventually get the customer assuming all things equal?

Naturally the one who invest SGD1,000! So the key question then, is how do you increase your CLV?

Typically, i will recommend that the first step is to divide all the services and products that your target market can buy from you into 3 categories.

  • Entry Level
  • Mid Level
  • Premium Level

After listing all your products, you can then ask yourself a few crucial questions:

  1. For products/services that are consumable, how can i remind my customers to buy from me again?
  2. Is there a way i can upsell or downsell to my existing customers?
  3. Is there a way i can bundle a few products together and increase the average selling price to my customers?

Another point you should know is that it cost 5 times more to get a new customer to buy from you than an existing customer to buy from you again.

If you can just convert 50% of your existing customers to buy from you again, you can easily grow your profit margin by a few times.


CONCLUSION:

I challenge you to start thinking about your customer lifetime value because this will make your Facebook advertising and any other form of marketing worth its value and more! This is how you generate massive ROI in all your advertising. I wish you all the best and if this article have brought value to you, do comment on how it have helped you.

Cheers!

*P.S. If you are looking to expand overseas using Facebook Advertising with Government Subsidies.. Take a look at this blog article.

MRA Grant for Facebook Advertising


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Norman Yeo
Norman Yeo is the General Manager of Tangy Lab Group Pte Ltd, a social media agency dedicated to help companies to fulfill their marketing objectives through Digital Marketing. Norman has helped various organizations, from SMEs to MNCs, to build brand loyalty and achieve actual ROI from Digital Marketing. He has increased his client’s reach & engagement by more than 25 times, and generated ROI on Sales of more than 15 times for them. Some of the notable companies he has worked with include 3M Singapore, The Hourglass, NTUC, Sime Darby (Thrifty Car Rental), CapitalMall Asia, AVAYA, SPH Plug & Play, etc.