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bidding up to lifetime customer value

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# 1
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For each ad group I track conv value/cost over the preceding 6 months. My profit margin for the average sale is 20% of the reported conv value, so I want conv value/cost to be at least 5 to break even on the first sale. I've been letting it go up to 10 before I start raising my bid, so my target range is 5 to 10, but I feel lost in picking a target.

 

I've read that I should be bidding right up to match my cost to my lifetime customer value. Why would I want to just break even with Adwords? Shouldn't I be aiming for a cost significantly less than lifetime customer value?

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Accepted by topic author squeebo
September 2015

Re: bidding up to lifetime customer value

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# 2
Top Contributor

Hello;

A great explanation for conversion value was presented a few years ago by Hal Varian - Google's Chief economist. Though a few years old, the principle still valid and well explained;

 

 

Moshe, AdWords Top Contributor , Twitter | Linkedin | Community Profile | Ad-Globe
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Re: bidding up to lifetime customer value

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# 3
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Thanks, that clarifies everything for me, and I now am using a spreadsheet to determine the best bids.