One of the primary struggles for new advertisers with a small audience is uncovering the most effective groups of people to target. Facebook is providing yet another tool for advertisers with the addition of the value-based Lookalike Audience.
As I type this, Lifetime Value (LTV) Custom Audiences and value-based Lookalike Audiences are available to select advertisers. Help Center pages dedicated to these features (here and here) are evidence that this is more than a test, but a new roll-out.
Let’s take a closer look at what Lifetime Value Custom Audiences and value-based Lookalike Audiences are, how to create them, and how you might use them.
NOTE: I don’t yet have this feature, so the screen grabs I provide below are from Nick Platt and David Herrmann, members of my Power Hitters Club – Elite community.
Lifetime Value (LTV) Custom Audiences
Customer lifetime value is the net profit you’ll earn from a single customer over the lifetime of your relationship.
Your customers aren’t all created equal. Even when uploading a list of customers who purchased a particular product, context is being obscured. Some customers are more valuable than others due to their lifetime value.
Some customers make a single purchase. Some come back again and again and again, ready to give you a credit card. It’s important to provide Facebook with lifetime value to help find other potential customers like them.
We’ll get to the details of how to create this in a bit, but understand that the Lifetime Value Custom Audience isn’t a new audience for you to target. It simply provides another column of data for an audience of your customers that you should already have.
The star of this update is the value-based Lookalike Audience that you can now create based on this.
Value-Based Lookalike Audience
The first step will be to provide Facebook with a lifetime value for all customers within a data Custom Audience. You should not focus only on the most valuable customers, but provide a comprehensive list to help differentiate the most valuable from the least valuable.
You will then be able to create a value-based Lookalike Audience. This allows Facebook to focus on those who provide the most value when finding others across Facebook with similar characteristics.
The end goal is to create a cold audience that is most likely to lead to positive results.
Create LTV Audiences
When creating a Custom Audience, select “Customer File.”
If you have this feature, you’ll then see an option for “Customer file with lifetime value (LTV).”
After selecting that, you’ll get what is similar to the typical process for creating a data Custom Audience off of your customer file.
You’ll notice a couple of differences.
First, you’ll need to “include a column with a range of customer values.”
Second, you’ll see a final step to create a Lookalike Audience. So the entire purpose of this, once again, is to create that Lookalike.
A few tips from Facebook…
1. Use dollar values only. Don’t include ratings or rankings, for example. You should be assigning a dollar value for each customer.
2. Include a full range of customers, from low to high value. This allows Facebook to be able to “hone in on what might distinguish an average customer from a great one.”
3. Don’t use negative values to signify undesirable customers. Facebook won’t count those.
4. Make sure you’re using the same currency throughout. Facebook will assume you are using the same currency otherwise.
5. Decimals for cents, but no other punctuation.
This file should include as much customer data as possible that can be matched to a Facebook user. There are 15 identifiers (including first name, last name, email address, and phone number) that can be used to increase your match rate.
Your file may look like this…
Notice the final column is for “value.”
Calculating Lifetime Value
This whole process assumes you know how to calculate lifetime value of your customers. This is most likely a manual process. And as I consider this for my own audience, it’s not all that easy to execute.
When in doubt, keep it simple. When generating your customer file, add columns for products purchased and price of that purchase. Use a formula to add up the values of those purchases.
This may be easier for some CRM software than others.
Create a Value-Based Lookalike Audience
Now that Facebook has a customer list including values, you will be able to generate a Lookalike Audience of those similar to your most valuable customers. You’ll need to select the country for each audience you create.
At this moment, I don’t have a screen grab for this process. However, I assume it’s no different than creating a Lookalike Audience off of any other source.
How to Use Value-Based Lookalike Audiences
Facebook recommends that you use this audience for lower funnel targeting. For example, use it for promoting a product instead of promoting a blog post or opt-in.
Facebook also says that your cost per result may be higher than usual initially, but that you should focus on the overall return on ad spend. Since Facebook is generating an audience of people most likely to have a high lifetime value, your focus shouldn’t be primarily on a single action.
This is all theory, of course, that needs to be proven in real life. And how we use a feature isn’t always as it’s intended.
My recommendation: Experiment. Try it for promoting content. Try it for promoting opt-ins. Try it for promoting products. You may or may not get great initial results. But you won’t know until you try.
But Facebook’s point concerning return on ad spend (ROAS) is a good one. If the focus of creating these audiences is on lifetime value, we should look beyond the initial action and monitor what these people do over the course of days, weeks, or months.
Future of Lifetime Value Audiences?
When I first heard about this, I assumed it would be based on the Facebook pixel. I’m surprised that the process is entirely manual, forcing advertisers to calculate and upload customer value.
It’s somewhat surprising that this is necessary. Facebook knows who hits a conversion page. They have the capability to assign a lifetime — or at least long-term — value of a single customer over days, weeks, months, or years.
The limitation could be “lifetime.” They can ditch website data after six months for Website Custom Audiences, so they may not have access to more than that at this time. Requiring more could be a storage issue (though I’m certainly no tech person).
Regardless, come on… This could easily be simplified for the advertiser who has routinely used Custom Conversions and events.
Do you have value-based Lookalike Audiences? How are you using them, and what types of results are you seeing? If you don’t have them, how might you use them?
Let me know in the comments below!