Outlast Everyone by Understanding Your Tribe’s Lifetime Value (LTV)

The one who can spend the most on advertising wins almost every time

When I started my first online business twenty years ago, I thought I had to make money on the first sale in order to be profitable. Well, I did have to make money on the first sale, because I only had one product to sell.

I ran Goodle Adwords like a maniac. I tested everything. I tweaked and modified my sales copy to ensure I got the best return on my ad spend. These were the earlier days of Adwords. The costs per click was much cheaper back-then.

Soon, the competition began to arrive.

My ad placement started to drop in rank. Soon I was on page two. Then five.

You won’t sell much on page two. Page five, forget it. But I couldn’t compete. Soon, the little product I sold had to be abandoned. I had a cap. My market would only pay so much for my little product. And I had one product, so I could only pay so much to earn a customer.

I didn’t have a list.

I’d make a sale, then look for the next sale. There was no tribe. There was no relationship-building.

If I’d known then what I know now, I’d still be serving that old niche, maybe with some of the original customers. This game, the creator’s game, is played with lifetime value (LTV), not a single sale. One-sale businesses are in for a lifetime of pain and heartache.

Not only do we serve our tribe better, when we retain them as clients longer, but we can also spend a lot more to earn their business. This is how we outlast everyone in our niche.

A lot of businesses don’t understand this secret

I like to buy products off Instagram ads. Not as a market test, but because the folks who sell me do a very good job with their ads and sales process. I know each of these ads cost the business a few bucks for me to click, and eventually buy.

I’ve clicked and researched some of these ads dozens of times. Not to be a jerk, but because I’m busy. I want more information. They haven’t convinced me yet, or maybe the same product was half the price on Amazon (this happens a lot).

I recently bought a customized piece of jewelry. I took their up-sell and bought a second piece for a great deal. In total, I spent $32.00. There was nowhere I could’ve got that deal anywhere else.

…but here’s where the company will lose their business in the long-run.

These folks operate in a cutthroat space. I probably cost them $15–25 in ad spend to acquire me as a customer. I’m on their email list, but their entire business is on Instagram, so they haven’t given me any correspondence during the three weeks I’ve waited for the product to arrive. In my estimation they made $2–3 off me.

These are three weeks they could’ve told their story, offered me a bigger package of more-expensive custom jewelry, and helped my become sold on their brand as a member of their tribe.

But this company doesn’t understand the LTV of their tribe.

There’s a cap on what they can spend to acquire me, before a sale isn’t worth their time. The product they sell isn’t unique enough that anyone could rip-off their business model in an afternoon.

I don’t expect to see this jewelry company in business by this time next year. The competition is too crafty. Every business who uses ads puts themselves in the vulnerable position of showing their cards to the marketplace (which is why I prefer content marketing and email).

There’s a way to spend a lot more than everyone and win your market

First, understand you don’t have to rely on advertising to build a business. You either build with time (content), money (ads), or both. So, you don’t have to use ads if you don’t want to. Ads will scale your business much faster, however.

If you do choose to build your business with ads, the person who can spend the most to acquire a single customer, wins.

The folks who understand this can take a loss on the first sale (even the second). Some can take a big loss. There are consultants who can spend $3,000 to acquire a single customer, because they know the LTV of that person is $100k.

What if you’re a small creator?

This works for you too. This is the value ladder model of doing business. The idea is never to run out of ways to serve your tribe (no matter what you sell). Clients are progressively offered different, rising tiers of products and services to match their needs and financial situation.

I’m a writer, creator, and teacher.

As of this writing I’m developing a series of books, courses, and services to serve my tribe as best I can. Each person falls into a unique situation along the value ladder.

One person may be a do-it-yourselfer, while another my have no time and want the entire process done for her (and be willing to pay for the privilege). We must serve our customers at any stop along their specific value ladder.

For example (this is made-up, so don’t get too excited):

Let’s say my client is worth $4,000 over her lifetime. This means I can lose money on a couple sales and still have a profitable relationship with this person. Technically, I can spend $3,999 to acquire her and still make money. No writer in my space could touch that.

I can spend more on product development than the competition.

I can spend more on customer service than the competition.

I can hire better employees than the competition.

I can spend so much on advertising, my message will drown all the others.

The value ladder creates an unfair advantage for you. Once you uncover ways to boost your LTV from a few dollars, to a few hundred, and a few thousand (and beyond), there’s no way your competition can outspend you.

What does this mean?

When you can outspend your competition to gain a customer, the competitor’s ads disappear. You win every click. Their ads won’t show, because, using the bid/click process on most platforms, you’ll be able to spend one hundred-fold around them.

Yes, this can be very expensive If you’re not careful.

Yes, your copywriting must be perfect. You’ve got to have ads that convert predictably, over time.

Most-important, you must have a relationship-building platform in place. Whether you use social, email, phone calls, or smoke signals, it doesn’t matter. The LTV mastery model only works if you’ve got a system in place with more to offer than one introductory product.

You don’t have to make money right now.

Delayed gratification is the key. The entrepreneur who can wait and out-spend their competitors the longest, will win the entire marketplace. This is the secret-sauce and a great way to scale your business from ‘zero to hero.’

It’s time to serve your tribe — bigger and better.

Never let a customer go, because they’ve bought everything you sell. People will leave your tribe for many reasons, but if they’ve left because the store shelves were empty — it’s time to get to work.

We’re waiting for you.

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August Birch (AKA the Book Mechanic) is both a fiction and non-fiction author from Michigan, USA. A self-proclaimed guardian of writers and creators, August teaches indie authors how to write books that sell and how to sell more of those books once they’re written. When he’s not writing or thinking about writing August carries a pocket knife and shaves his head with a safety razor.