Customer Lifetime Value (LTV)
Customer Lifetime Value (LTV) refers to the revenue you receive from a single customer over the entire course of their relationship with you. This is extremely important to measure if you offer recurring services to your customers (weekly, monthly, quarterly, etc.).
How to calculate your Customer Lifetime Value:
Average Revenue Per User / Customer Churn Rate = Customer Lifetime Value (LTV)
What we like Customer Lifetime Value:
Knowing your Customer Lifetime Value (LTV) allows you to make important decisions about your sales, marketing, and customer fulfillment strategy. First, you’re going to want to focus your efforts on the lead generation and lead conversion activities that help you acquire long-term customers. Second, you’re going to want to deliver a great service and provide excellent customer support to keep your existing customers coming back for more.
What we DON’T like about Customer Lifetime Value:
Customer Lifetime Value (LTV) is great for planning your future growth strategy, but it can also fluctuate quite a bit. You see, if you’re just getting started, it’s hard to tell how long customers will stay with you for. The same is true if you only have a small number of customers. There’s likely to be a lot of variance from one customer to the next. Last, if your business is seasonal, there’s a good chance people will cancel their recurring services during this time.
Marketing metrics similar to Customer Lifetime Value:
Before you select Average Purchase Value as your One Metric That Matters (OMTM), be sure to check out these related marketing metrics and KPIs for context.
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