Lifetime Value (LTV) Calculator
Measure the total predicted revenue from a single customer.
Customer Lifetime Value (LTV)
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Understanding Lifetime Value (LTV)
What is Lifetime Value?
Customer Lifetime Value (LTV or CLV) is a crucial metric that estimates the total revenue a business can reasonably expect from a single customer account throughout their entire relationship. It considers a customer’s revenue value and compares that number to the company’s predicted customer lifespan. It’s a forward-looking metric that helps you make long-term strategic decisions.
Why is LTV So Important?
- Informs Acquisition Spending: LTV tells you how much you can afford to spend to acquire a new customer (your Customer Acquisition Cost, or CAC) while remaining profitable.
- Identifies Best Customers: By segmenting your customers by LTV, you can identify and focus on your most profitable customer types.
- Guides Retention Efforts: A high LTV is a direct result of strong customer retention. Focusing on increasing LTV naturally leads to better retention strategies.
How to Improve Your LTV
- Increase Average Order Value: Use upselling and cross-selling techniques to encourage customers to spend more with each purchase.
- Boost Purchase Frequency: Implement loyalty programs, email marketing, and retargeting to encourage repeat business.
- Improve Customer Retention: Provide excellent customer service and build strong relationships to extend the average customer lifespan.