Customer Lifetime Value (LTV) is one of the most important marketing indicators. It helps you understand the level of customer interest in your product or service.
LTV helps you calculate profit from a single client for the entire span of your relationship. In short, this indicator converts your customers into a tangible value.
Calculate this value mathematically using one of the methods enumerated below:
This method requires more input, but results in greater precision:
The most verbose, but the most accurate formula is shown here:
- Determine the real return on investment (ROI) against the cost of acquiring a new customer.
- Maximize lifetime customer value in relation to the cost of attracting new clients (CAC).
- Elucidate your target audience.
- Strategize customer retention more accurately.
- Knowledge of LTV is needed to produce a comprehensive cross-section of clients based on their value. By means of thorough comprehension and proactive use of this indicator, any company can build a strategy to work with their specific client base and focus its attention on the group of clients with whom it is more profitable to do business.