Customer Lifetime Value has its place but this isn’t it.
This is about IMMEDIATE Average Customer Value (ACV) … not Customer Lifetime Value.
ACV measures the IMMEDIATE impact that a specific marketing funnel is having on the business. Unless you’re sitting on endless cash you simply can’t afford to wait a “lifetime” to recoup acquisition costs.
Calculating Average Customer Value (ACV)
Here’s the formula for calculating ACV…
Tripwire Price + (Core Offer Price * Core Offer Conversion Rate) + (Profit Maximizer Price * Profit Maximizer Conversion Rate) = Average Customer Value (ACV)
Here’s what it looks like for an example value ladder (with 3-offering heirarchy)…
$7 + $100(.3) + $300(.1) = $67 Average Customer Value
In this example, every time you sell a $7 Tripwire Offer… you make $67 in revenue.
In other words, you can spend $67 to sell a $7 offer WITHOUT having to go negative!
Calculating Average Visitor Value (AVV)
Now that you know what a customer is worth… you can calculate how much you can pay for traffic.
This is how you dominate your market. Your competitors are guessing how much they can pay per click… you have data.
Here’s the formula for calculating Average Visitor Value…
Average Customer Value (ACV) * Tripwire Conversion Rate = Average Visitor Value (AVV)
Here’s what it looks like for the example above…
67 * .05 = $3.35 Average Visitor Value (AVV)
This means that you could spend as much as $3.35 per click without going negative.
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