Lifetime Value (Explained)

Lifetime value

What is lifetime value?

In business terms, the lifetime value or (LTV) is the monetary value or worth that you can gain from a customer with respect to their relation with your company.

The Lifetime Value is a very strong human resource and financing indicator. Although, it heavily relies on estimation, but it provides with a clear picture of the number of customers that you can achieve in the years to come, and how beneficial it is for you to gain a clientele. In addition, it provides a cost benefit analysis (CBA) of whether should you gain customers, and the costs of gaining a customer.

Frequently asked questions

What is lifetime value?

Customer lifetime value, i.e. CLV or LTV, is one of the key statistics that allow you to track a customer as part of customer service. It allows you to determine how valuable a customer is to your company based on the entire customer-company relationship. This indicator helps companies develop strategies for acquiring new customers and retaining those who have already bought something.

How to calculate lifetime value?

To calculate the long-term value of a customer, you first need to calculate the average value of the purchases they have made and then multiply that number by the average frequency of purchases. This is how you determine the customer's value. In the next step, you have to multiply it by the client's life expectancy.

How to improve lifetime value?

There are several considerations for increasing the customer's lifetime value. First, you can deliver valuable content that engages your customers. Secondly, efficient customer service will be a key issue here. It's also critical to listen to your customers as well as offering them a personalized experience.

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