Customer lifetime value (LTV)
Posted: Sat Feb 01, 2025 6:34 am
Customer value is the total revenue that a customer brings in over their entire life cycle, from their first purchase until they leave the customer category for some reason.
Customer lifetime value (LTV)
Source: shutterstock.com
This metric allows you to estimate the amount of profit that the consumer provides over the entire period of cooperation with the company. With its help, you can calculate the average income that the buyer brings over the entire life cycle.
For example, for online cinemas, the japan email list customer value is calculated based on payments for a regular subscription and periodic purchases of films that are made throughout the entire period of using the platform. The Lifetime Value (LTV) metric does not have a well-established name in the Russian version, so the English abbreviation is most often used.
For analysis, average indicators are more interesting. Thus, the following formula can be used:
LTV = ∑Sales LT / ∑Customers LT
Where
Sales LT – the sum of all customer payments throughout the life cycle (Lifetime).
Customers LT – the total number of customers taken into account when calculating the metric.
Just like calculating the cost of attracting customers, determining LTV is not very easy. The number of customers and their payments are dynamic indicators, therefore, this metric will not be constant. There are several methods for determining the value of a customer. All of them provide for large data sizes for the sample in order to obtain more accurate indicators and forecasts.
Based on the LTV metric, it is possible to predict revenue volumes and business profitability in future periods. In addition, it is possible to compare transaction revenues with the costs of acquiring a customer (LTV and CAC), and it is also possible to find out how many customers are needed to implement established plans and assess the impact of their churn on sales results.
An increase in the LTV indicator is a good signal for business. If the customer value falls, immediate management decisions are needed.
Customer lifetime value (LTV)
Source: shutterstock.com
This metric allows you to estimate the amount of profit that the consumer provides over the entire period of cooperation with the company. With its help, you can calculate the average income that the buyer brings over the entire life cycle.
For example, for online cinemas, the japan email list customer value is calculated based on payments for a regular subscription and periodic purchases of films that are made throughout the entire period of using the platform. The Lifetime Value (LTV) metric does not have a well-established name in the Russian version, so the English abbreviation is most often used.
For analysis, average indicators are more interesting. Thus, the following formula can be used:
LTV = ∑Sales LT / ∑Customers LT
Where
Sales LT – the sum of all customer payments throughout the life cycle (Lifetime).
Customers LT – the total number of customers taken into account when calculating the metric.
Just like calculating the cost of attracting customers, determining LTV is not very easy. The number of customers and their payments are dynamic indicators, therefore, this metric will not be constant. There are several methods for determining the value of a customer. All of them provide for large data sizes for the sample in order to obtain more accurate indicators and forecasts.
Based on the LTV metric, it is possible to predict revenue volumes and business profitability in future periods. In addition, it is possible to compare transaction revenues with the costs of acquiring a customer (LTV and CAC), and it is also possible to find out how many customers are needed to implement established plans and assess the impact of their churn on sales results.
An increase in the LTV indicator is a good signal for business. If the customer value falls, immediate management decisions are needed.