Lifetime Value (LTV)


lifetime value (LTV) is the net present value of the cash flows attributed to the relationship with a customer. The use of customer lifetime value as a marketing metric tends to place greater emphasis on customer service and long-term customer satisfaction, rather than on maximizing short-term sales.

Lifetime value is typically used to judge the appropriateness of the costs of acquisition of a customer. For example, if a new customer costs $50 to acquire (COCA, or cost of customer acquisition), and their lifetime value is $60, then the customer is judged to be profitable, and acquisition of additional similar customers is acceptable.

If you are struggling with where to start put a stake in the ground and start measuring from that point. Most accounting software have tools to help you find and set up categories and class for many crucial measuring functions such as; average ticket prices, which advertising campaigns clients enter your system and the total sales a client has had with you since coming into your system. 

After measuring customer value, the next step is to manage customer value - to make money by creating very high ROI customer marketing campaigns, as a client of www.ethicalpro.com and www.prodromosmarketing.com we will help you do just that.

Give it a go with this easy to use LTV Calculator. Have Fun!

Average revenue of one-time sale per customer per year:

Average revenue from additional sales per customer during the year:

Total average sales per customer for one year:

Average new customer referrals received per customer per year:    

Total average revenue of a customer for one year:

Average number of years doing business with a customer:    

Total lifetime revenue of a customer:

Gross profit margin of your business (percentage):      %

Average lifetime value of a customer:

 

 


Additionally, when the basic level of LTV is achieved you can then progress into customer equity which is more complex.  The use of the cost of client acquisitions tool and ROI tool will be helpful in your next steps. As well as the training available to you as a member of Prodromos Marketing. The advantages of these tools include:

  • management of customer relationship as an asset
  • monitoring the impact of management strategies and marketing investments on the value of customer assets
  • determination of the optimal level of investments in marketing and sales activities
  • implementation of sensitivity analysis in order to determinate getting impact by spending extra money on each customer
  • optimal allocation of limited resources for ongoing marketing activities in order to achieve a maximum return
  • a good basis for selecting customers and for decision making regarding customer specific communication strategies
  • measurement of customer loyalty (proportion of purchase, probability of purchase and repurchase, purchase frequency and sequence, referrals and etc.)

Remember; “Something measured improves, when measured and reported it improves exponentially”.  Join our community of business committed to S.M.A.R.T  business growth and take control of your future, today.   Most of our clients say that accountability has been the greatest motivator for taking back control of their lives, professional and personal.