What is Lifetime Value (LTV)?
Lifetime Value (LTV) is a prediction of the total revenue a business can expect from a single customer account throughout the duration of their relationship. LTV helps businesses understand how much they can spend on customer acquisition while remaining profitable.
How to Measure Lifetime Value (LTV)?
LTV can be measured by:
Average Purchase Value: Multiply the average purchase value by the number of purchases per year to get the annual revenue per customer.
Customer Lifespan: Estimate the number of years a customer is expected to remain active with your business.
LTV Formula: Multiply the annual revenue per customer by the customer lifespan to calculate LTV.
How to Improve Lifetime Value (LTV)?
To increase LTV:
Enhance Customer Retention: Implement strategies to retain customers longer, such as loyalty programs, personalized services, and proactive support.
Upsell and Cross-Sell: Offer additional products or services to existing customers to increase their spending over time.
Improve Customer Satisfaction: Focus on delivering exceptional value and service to encourage repeat purchases and longer customer relationships.
Reduce Churn: Identify and address the reasons for customer churn to maintain a higher customer lifespan.