As an E-Commerce website, Digital Advertising is ubiquitous when you start to explore a marketing strategy. It almost doesn’t even seem like an option, but in reality is it useful?
Well first let’s talk about the motivations behind digital agencies. In their world they care about two things, amount of bidders and quality of leads. Allow me to explain.
Amount of Bidders
Simplifying a lot of complexity here, the more bidders for specific keywords the higher the bids need to be in order to be successful. Which translates into more revenue.
Quality of Leads
The higher the quality the traffic is that’s responding to the ad, the more valuable the ad actually is to the bidder and thus they’d be willing to pay more.
Now, lets shift gears for a second and think more about the purchaser of these ads (you!). You essentially want to get more customers purchasing your products and as long as the cost is lower than the LTV (long term value) of the customer that you’ve acquired it’s worth it.
The problem with this strategy is that the digital advertising firms know this. This is bad because it add’s another item that they care about and arguably the most important one. This is milking their purchasers just enoughto keep their LTV higher than their acquisition costs. This allows you to keep buying because its profitable, but ever so barely.
So how do you combat this? That’s simple. You need to build a brand and a following of loyal customers and work to ensure that your LTV is significantly higher than the market average so that this acquisition channel becomes profitable for you.