Lifetime Value is a metric that calculates the economic value generat by a customer during the duration of their relationship with a brand.
July 18, 2024
Digital Marketing Strategies
Having information about how long customers will remain loyal to your business or how much they will spend on your products will make it easier to design a marketing strategy to achieve the growth of your company . For this reason, it is advisable to know and understand the Lifetime Value, an essential concept that you must take into account in business management. Here you will discover how to calculate it and a series of tips to improve it and have a positive impact on your brand.
What is Lifetime Value and what does it consist of?
Lifetime Value (LTV) is a metric us in marketing to understand what a customer contributes to a brand when purchasing its products . In other words, it estimates the economic value that a customer generates for a company list of india consumer email during their business relationship , measuring from the first purchase to the last. This calculation is a forecast , since it is not possible to know with certainty the time that the user will spend with the company, the frequency with which they will make purchases, or the amount of money they will spend on each transaction.
How is Lifetime Value calculat?
Although there are different formulas to calculate the Lifetime Value, the most common and simple one is the one permanent telephone – we develop our own computer applications that uses the following values:
Average purchase expenditure . It is the average Lifetime Value expenditure made by the customer in each transaction.
Average purchase frequency . The number esperanto leads of times a customer makes a purchase in a given period of time.
Customer lifetime – The length of time a customer has been purchasing from your business.
Applying these values, the resulting formula for calculating the lifetime value of a customer is as follows.