12 January 2023
CEO of Acanthis
Lifetime Value, or LTV, is simply calculating how much money a customer will spend with you over time. Knowing the Lifetime Value of your customer will allow you to decide who to focus on and where to put your resources.
To calculate LTV, you need to work out the average amount of money a customer will spend with you and multiply it by the average amount of time a customer will stay. For example, if a customer spends $50 per month and stays a customer for 2 years, their LTV would be $1,200.
Once you know the LTV of your customers it will help you to identify the types of customer groups you should be focusing on as well as formulating a plan to increase the average LTV of all of your customers.
Another great use for knowing your customer's LTV is to predict your future revenue which will allow you to make more informed decisions around pricing for products and creating better marketing strategies.
It is important however to note that monitoring LTV is something that shouldn't be done just today, it should be closely monitored over time to allow you to tweak different areas on the fly.