Google Ads CLV Bidding: Optimizing for Lifetime Value, Not Just First Order (2024)

The Race to the Bottom. If Competitor A is willing to pay $50 for a customer, and you are only willing to pay $40, Proprietor A wins. They get the impression. They get the click. They get the market share.

How can Competitor A afford $50? Because they know the customer is worth $500 over 2 years. You think the customer is only worth $100 today.

You are playing Checkers. They are playing Chess. This guide shows you how to bid based on Customer Lifetime Value (CLV).

Part 1: The Math (Calculating LTV)

Before you touch Google Ads, you need a spreadsheet.

LTV Formula: Average Order Value (AOV) x Purchase Frequency x Retention Period

• Example: You sell coffee.
• AOV: $20.
• Frequency: 1 bag/month.
• Retention: 12 months.
• LTV: $20 x 12 = $240.

The Margin Factor: LTV is Revenue. You need LTV Profit.

• Gross Margin: 50%.
• LTV Profit: $120.

The Max CAC: How much of that $120 are you willing to spend to acquire them?

• Aggressive (Growth): $100.
• Conservative (Profit): $40.

Part 2: New Customer Acquisition (NCA) Goals

Google Ads now has a native setting to help you execute this. New Customer Acquisition (NCA) Goal.

Settings:

1. Define Existing Customers: Upload your email list (Customer Match) so Google knows who they are.
2. Set "New Customer Value":
   • This is the extra value you assign to a new face.
   • First Order Value: $20.
   • Plus New Customer Bonus: +$50.
   • Total Conversion Value seen by Algorithm: $70.

The Modes:

• "Bid Higher for New Customers": Use the Bonus value to inflate bids for new users, but still bid on returning users.
• "New Customers Only": Restrict the campaign so it never shows to existing customers. (Great for aggressive scale).

Part 3: Identifying High-LTV Signals

Not all new customers are equal.

• Customer buying "Bulk Pack" (LTV $500).
• Customer buying "Sample Pack" (LTV $20).

Strategy: Segment your Conversion Values.

• Pass the actual order total dynamically.
• Use tROAS Bidding. The algorithm will naturally bid 25x more for the Bulk Pack user than the Sample Pack user.

Summary

Bidding on LTV requires nerve. You will see your immediate ROAS drop (because you are paying more for the first order). But your Bank Account will grow (because you are acquiring cohorts that pay you for years).

Tip: Monitor your "Cash Conversion Cycle." How many days does it take to recoup the ad spend? If it's >90 days, ensure you have the cash flow to sustain it.