Maximizing Customer Lifetime Value with Facebook Bid Multipliers
Facebook's recent feature is helping marketers shift their focus from the network's advertising capabilities to a more meticulous look at their customer data. Using Optimove's powerful segmentation competences alongside it makes it so much easier to drive success
A few weeks ago, Facebook made some new additions to its Bid Multipliers functionality, which empowers marketers to leverage their knowledge and change their ad optimization from ROAS (Return on Ad Spend) to customer LTV.
Here at Optimove, we strive to empower marketers to maximize the value of each customer by using their customer data. So when we witness a leading ad network—such as Facebook—allowing marketers to leverage customers’ LTV data and optimize their bidding strategy, it’s truly exciting news for us. But first things first:
What are Facebook’s Bid Multipliers?
For the uninitiated, Bid Multipliers allow marketers to reduce the amount of audience segmentation and define bids by separating audiences within a single ad set. Marketers can create a single ad set and determine a level bid per usual. Then, instead of creating multiple ad sets for each age group, marketers can leverage bid multipliers to focus on diverse age ranges within the audience. For example, 100% for the 18-25 age group, 60% for the 26-40 group and 40% for all others. The final bid is calculated as the percentage for the specific group, multiplied by the ad set level bid.
Bid Multipliers reduces the number of ad sets and increases delivery effectiveness by providing more data for Facebook’s algorithms to learn and optimize each ad set instead of separating the data. The real benefit, however, lies in marketers’ ability to adjust their bids based on a group’s LTV, focusing precious budget on the more valuable segments.
The Key When Focusing on LTV
If you’re a marketer, hopefully, you are familiar with the 80%-20% Pareto principle – 20% of your customers will produce 80% of the revenue. Sometimes the effect is even more extreme with the top 5% of a brand’s customers producing 60% of its revenue.
In a utopian world, you’d have an unlimited budget and wouldn’t need to worry about optimizing bids. Unfortunately, this is the real world, in which budgets are short in hand and revenues are the main KPI of any business. As a result, marketers need to be smart and focus on those customers who provide the most value to their respective companies, that 20%, or even 5%.
But we all know that treating all your customers as one is less than ideal. There are many ways to segment your audience. Let’s see some popular methods from Facebook’s Bid Multipliers list:
- User operating systems – Users of a given operating system might be more valuable than others. For example, recent research found that iPhone users spent more online than Android customers. If this is the case in your data, Facebook currently allows you to set different bids for Android, iOS, Windows and Windows Phone operating systems.
- Device platform – As marketers, we always try to meet our customers where they are. But how about meeting them where they are most valuable? For example, by the end of this year, nearly 80% of US travelers who book online will do so via mobile. For travel companies with ‘valuable’ mobile buyers, it might be smart to adapt their Bid Multipliers accordingly.
- User recency – As the saying goes – it’s best to “strike the iron while it’s hot”. If you are in a hyper-competitive industry, differentiate bids for those who visited your website a day ago, three days ago and further out.
- Age – Differences in lifetime value between age groups can be significant. From hipster clothing brands who find people until their early 30s as most valuable to luxury jewelry sites looking for the more mature crowd. Age should be a key piece in your segmentation strategy and Facebook allows you to set Bid Multipliers based on age ranges.
- Gender – The eldest form of segmentation is still one of the strongest and Facebook recognizes that for some brands, the female audience might be more valuable than males, or vice versa.
Of course, the above are simple ways to leverage Bid Multiplier; Facebook also supports complex expressions that combine multiple parameters.
Powering Bid Multipliers with Optimove
Optimove has allowed its users to leverage strong segmentation capabilities and create custom audiences on Facebook since 2014. With the new Bid Multiplier capabilities, marketers can further optimize their ad sets. Through Optimove’s Customer Explorer, marketers can easily and quickly identify differences in future value between two target audiences and adjust their bid strategy accordingly. See in this example here:
As seen above, in only 90 seconds or so marketers can create segments as simple or complex as they’d like and compare them to one another within Optimove. In this example, two segments are created. The first for female customers who are new to the business and made their last purchase over 10 days ago, and the second for those who made their last purchase less than 10 days ago. Within Optimove, the marketer can then easily compare both segments, see how many customers fall into each segment and discover how they differ across any customer attribute, such as their predicted average future value.
Based on the results of the above video, female customers who purchased online 10 or more days ago have an average future value of $13.5, while those who did so fewer than 10 days ago have a value of $72.6. With this information and leveraging the “user recency” and “gender” parameters, marketers could create a bidding strategy that would bid significantly more of the bid for customers who fall in the second group, and keep adjusting bids for other groups, assuming all other customers have a future value somewhere in between these groups.
We have seen Optimove users benefit from the combination of our powerful segmentation and Facebook’s Bid Multipliers. A combination, that when used correctly, translates to increased profits by optimizing spend and focusing on customers with higher Future Values.
The Facebook Bid Multiplier API is available on a limited basis to whitelisted partners and advertisers. If you would like to use it, contact your Facebook representative.