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If you advertise on Facebook, you’ve probably encountered the Lookalike Audiences feature. The aim of this feature is to identify patterns and trends in a particular audience so that we can essentially target others that fit into the same pattern. It’s as close as we’re ever going to get to cloning our customers (a dream all businesses have!).
Today, we’re not just talking about Lookalike Audiences but more specifically implementing this idea using lifetime value. Despite all the positives of Facebook advertising, one area that has come under fire is targeting. According to one survey, as many as six in ten small businesses miss their targets with advertising and are forced to abandon campaigns and waste resources.
However, you will adopt the wrong mindset if you assume that Facebook advertising has lost its luster. One of the biggest problems with campaigns on Facebook is actually the user rather than the platform itself; with one mistake, the whole targeting aspect of the campaign goes awry, and results are impossible from this moment forward.
As a business or marketer, you have an opportunity to reach the right audience time and time again…and it’s through customer lifetime value. If you want to avoid being in the 60% of businesses that struggle to find success with Facebook advertising, this is the strategy you’ll want to adopt in 2021.
If you’ve never tracked this metric, now is the time to start. According to many experts in the industry, this is quickly becoming the most important metric with regards to advertising. But what does it mean? Well, customer lifetime value is a prediction of what a customer contributes to a business over their lifetime. While some people purchase from a brand just once, others buy regularly, and this second group will have a much higher contribution over their lifetime.
When it comes to customer lifetime value, the metric is interested in the predicted net profit attributed to customers. Does the average customer return once per month or does the nature of your product/service mean that they only need to spend money every year (or maybe never again)? While you might break even on some customers, another group will generate a small profit while the most loyal customers are the biggest money-makers for the company.
Of course, once you have a customer buying from your brand, it gets cheaper and easier to keep selling to them. For the first purchase, however, you’ll need to invest in research, marketing and advertising, but once they’re a customer, a simple email can generate a second sale.
To thrive as a business, you need to do one of two things:
In this guide, we’re focusing on the second of these options. As an example, let’s say that we run a small grocery shop in a tiny village. Every day, an elderly woman from the neighborhood enters the store to get a newspaper and a few food items. Since we can’t clone this woman , we look at the reasons why she visits every single day.
Once we identify the reasons she visits daily, we can advertise to people who have similar needs. With any luck, they also start visiting daily. This is the basis for Lookalike Audiences, but it happens on a much grander scale. What are the similarities between a group of 100 people? With the answer, we can create an advertising campaign specifically targeted towards people with this similarity to our most loyal customers. With interest-based or demographic similarities, the hope is that these people also become loyal customers.
If you like the sound of artificially cloning your loyal customers, follow the steps in this section and you won’t go wrong.
Before anything else, you need to think about the optimal match rate with the customer data you want to upload to Facebook. Normally, businesses just upload the file without considering the optimal match rate, and this is one of the user mistakes we mentioned previously. As you start adding more fields, you will increase the match rate since Facebook will be able to match against more pieces of data. In total, you can add 15 unique identifier fields.
As a bonus tip, don’t forget to include Country/Region. If you only sell domestically, you might think this field unnecessary because all the data comes from the United States anyway. Regardless, don’t forget that Facebook operates on a global scale. Even if all your data comes from the same country, Facebook won’t recognize this, so adding a Country/Region field keeps the matching process more efficient.
When finishing the customer file, we recommend saving in a .TXT or .CSV file format because these are the two used by Facebook.
With the customer data prepared, you now need to create your custom audience. When in Ads Manager, go into the Audiences dashboard and click Audiences (this is located underneath Assets). After clicking on Create Audience, you’ll see an option in the drop-down menu called Custom Audience. Of course, you’re going to choose a customer file rather than basing the audience on offline activity, website traffic, app activity, or engagement.
If you have your own file, ignore all the other options and click this. For example, you might have data exported from a customer relationship management tool. Alternatively, choose the method that matches your specific need best.
When prompted, you can either copy and paste the list into the space provided or upload the whole list. Thanks to the first step, the customer data is prepared and ready to be used in a lookalike audience campaign. However, we still need to map identifiers. With all identifiers mapped in each column, click the blue button at the bottom - Upload and Create.
At this stage, lots of people panic because they don’t know what happens next. When in your Audiences dashboard, you’ll probably see the customer file custom audience, but it will be labeled ‘populating’. If so, don’t worry. Facebook needs to build the custom audience, a process that can take up to 30 minutes to complete (go enjoy a cup of coffee while you wait!).
At this stage, you’ve had a cup of coffee, and Facebook has your custom audience ready. In this third step, we want to tell Facebook to go out and find people similar to those in the custom audience. How do we do this? Through Lookalike Audiences. After uploading the data in the previous step, Facebook will offer you an option to create either an ad or a lookalike audience, so you shouldn’t need to go hunting for this step.
After clicking through, you should see that the Source field has your custom audience already loaded and ready to go. You’ll need to refine two more settings before creating the audience:
Now, you’re ready to start enjoying the fruits of your labor. If everything is set up perfectly, Facebook continually targets people with the potential of having a similar lifetime value to the customers in your custom audience. To help with lifetime value lookalike audiences, we’re going to finish with three tips.
First, use lifetime value as an additional identifier to continually improve audience quality. When creating a custom audience, there’s an option to ‘Include LTV for better-performing lookalikes’. Also,if you’re currently selling on a platform like WooCommerce or Shopify, we have great news. They’ve made exporting customer data incredibly simple. In fact, you can even include purchase values in this data set.
Second, utilize A/B testing to compare several ad components against one another. With split testing, you’ll continually improve the ad for the target market and ensure that the right creatives are available for customers.
Third, don’t just give up when people fail to convert. Instead, sweep them up with a remarketing campaign. When using Lookalike Audiences, you know that these people have similarities with your most loyal customers. Just because they didn’t convert the first time, this doesn’t mean they won’t convert at all.
Lifetime value lookalike audiences guarantee strong targeting with Facebook ads, so why not get started today?
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