Do you know what Lifetime Value (LTV) is and how it can help your business?
Posted: Sun Jan 05, 2025 8:11 am
Do you know that customer who is always buying from you and is loyal to your business? Well, you may be experiencing LTV without knowing what it is.
LTV (Lifetime Value) is the value that a customer will return to you in the long term. In other words, it is as if each satisfied and loyal customer had a value in currency. This value in currency is how much that customer is worth to you. This way, you can evaluate how important it indonesia whatsapp number database was to have retained that customer. This is also very important so that you can calculate how much each customer can be worth to you in the future.
Many companies use this method to check whether or not it is worth making a certain investment in marketing , but it can be used by you in many different ways, such as to check whether it is worth offering certain benefits or lowering the price of a certain sale or product. In this way, LTV can be very helpful in knowing whether you will have a future return on everything you invested.
Just like in marketing , LTV is also used for other types of investment, such as investing in improvements to the workplace. So if you really want to know if it's worth making the investment, just calculate it with a very simple and easy formula.
You will find in this article:
• How to calculate LTV?
• Cohort analysis in practice
• What should you do when you notice this drop?
How to calculate LTV?
LTV is very simple to calculate. All you need to do is calculate the average spending your customers have made over a certain period of time. For example, you can take the average spending of your customers or even just one customer over a period of 3 years, and analyze how much was spent in the first 12 months, then 24 months, and finally 36 months.
This way, knowing the average expenses, you will have a projection of your relationship with your customers and how much you will earn on average after 3 years, or even before.
This type of calculation can also be done with companies that are relatively new to the market, reducing the analysis time. This calculation is called Cohort Analysis.
Cohort analysis in practice
Cohort analysis is done according to the month, when you divide the number of customers who joined each month and analyze how much they spent in 6 months and so on, until you reach the largest period of analysis. Each month in Cohort Analysis is called a harvest, so you see how much customers from the harvest of January, February, March and so on spent in a certain period.
In addition to being useful for investment analysis, the most important thing is to understand how your company's sales are behaving. This is because, let's imagine that you made more profit in October than in January and the same thing happened in November, December and January of the following year. This means that there is something that started in October or even before that attracted more customers .
Knowing this, you just need to analyze what was done and how you can improve and develop it even further. Likewise, the opposite can also happen and you simply lose part of your profits because of customers you lost, and then an analysis is needed for this.
What to do when you notice this drop?
Many business owners, when they see that their LTV is falling, start to despair and look for short-term results, but this is not necessary. Just as it took you a long time to get your LTV high, it will also take a long time to get it back to the desired level.
So you should follow some steps of what to do in these cases. In these specific cases you have two alternatives: one risky and the other more relaxed.
The easiest option that you should consider is to increase your product range, which will attract curious looks and help you with new customers.
LTV (Lifetime Value) is the value that a customer will return to you in the long term. In other words, it is as if each satisfied and loyal customer had a value in currency. This value in currency is how much that customer is worth to you. This way, you can evaluate how important it indonesia whatsapp number database was to have retained that customer. This is also very important so that you can calculate how much each customer can be worth to you in the future.
Many companies use this method to check whether or not it is worth making a certain investment in marketing , but it can be used by you in many different ways, such as to check whether it is worth offering certain benefits or lowering the price of a certain sale or product. In this way, LTV can be very helpful in knowing whether you will have a future return on everything you invested.
Just like in marketing , LTV is also used for other types of investment, such as investing in improvements to the workplace. So if you really want to know if it's worth making the investment, just calculate it with a very simple and easy formula.
You will find in this article:
• How to calculate LTV?
• Cohort analysis in practice
• What should you do when you notice this drop?
How to calculate LTV?
LTV is very simple to calculate. All you need to do is calculate the average spending your customers have made over a certain period of time. For example, you can take the average spending of your customers or even just one customer over a period of 3 years, and analyze how much was spent in the first 12 months, then 24 months, and finally 36 months.
This way, knowing the average expenses, you will have a projection of your relationship with your customers and how much you will earn on average after 3 years, or even before.
This type of calculation can also be done with companies that are relatively new to the market, reducing the analysis time. This calculation is called Cohort Analysis.
Cohort analysis in practice
Cohort analysis is done according to the month, when you divide the number of customers who joined each month and analyze how much they spent in 6 months and so on, until you reach the largest period of analysis. Each month in Cohort Analysis is called a harvest, so you see how much customers from the harvest of January, February, March and so on spent in a certain period.
In addition to being useful for investment analysis, the most important thing is to understand how your company's sales are behaving. This is because, let's imagine that you made more profit in October than in January and the same thing happened in November, December and January of the following year. This means that there is something that started in October or even before that attracted more customers .
Knowing this, you just need to analyze what was done and how you can improve and develop it even further. Likewise, the opposite can also happen and you simply lose part of your profits because of customers you lost, and then an analysis is needed for this.
What to do when you notice this drop?
Many business owners, when they see that their LTV is falling, start to despair and look for short-term results, but this is not necessary. Just as it took you a long time to get your LTV high, it will also take a long time to get it back to the desired level.
So you should follow some steps of what to do in these cases. In these specific cases you have two alternatives: one risky and the other more relaxed.
The easiest option that you should consider is to increase your product range, which will attract curious looks and help you with new customers.