Lifetime Value is an expression in English that means the value of the life cycle. In this case, it the profit that each customer of your company generates during a certain period. Have you ever thought about which of your customers have the greatest potential. And generate the most profitability for your business? Know that this information is essential to identify opportunities. Many managers and entrepreneurs are calculating the Cost per Customer Acquisition ( CAC ), but they do not realize that, even after a customer is won, it is still a business opportunity and can bring new income to the company . Therefore, let’s talk now about Lifetime Value, so that you can learn how to calculate your customers’ individual income and find out how much value it can generate in the future.
After all, what is Lifetime Value and why is it important
Commonly called LTV. Lifetime Value is a metric widely used by SaaS companies. Precisely because it measures the amount of revenue with each customer over the course of the Electronic , Electrical Manufacturers Email List relationship between him and the company. However, LTV can be appli to any type of business. It is enough that it is possible to identify the lifetime of a customer. If this is not possible, the commonly used period is 12 months. With this data in hand, you will have arguments and guidelines to get this client to invest even more in your company. Identifying potential customers is valuable for growth and opportunity generation in your business. How to calculate Lifetime Value? The Lifetime Value calculation is based on how much your client invests per month in your business, which must be multiplied by the average retention time.
For example, use the calculation of 12 if the contract
The next step is to calculate the costs and expenses that the customer generated for your company, such as: acquisition cost, support expenses or other situations and GMX Email List the retention cost, such as loyalty actions, for example. These last two multipli by the length of the contract . If they are monthly expenses. Okay, now just subtract one value from the other . Estimat revenue less expenses. The result is your customer’s LTV. It is important to say that this calculation periodically or, at least, the values review with each client of the company.