The objective of LTV (lifetime value) is to know how much each customer of the company is worth. With this data, you will be able to evaluate which retention and acquisition strategies are providing better results.
This metric is important to assess how customer expenses are happening and if they are giving a return. Therefore, it is essential to justify investment in marketing. See how simple it is to calculate.
How to measure
To obtain the LTV value, simply multiply your average sales value by the number of payments. The total should be multiplied by the average time (years) a customer remains loyal to the company.
Ideally, the LTV should be higher than the CAC, which indicates that the financial return from customers is higher than the marketing costs incurred to acquire the customer.
How to analyze?
This calculation is fundamental to understand the financial sustainability of the company in the short, medium, and long term. When it seems unfavorable, it opens possibilities for budget reorganization.
Through data, you can evaluate where and how to improve at each point. You can understand through which path the most loyal customers arrive at the company
How to improve LTV
The best way to increase LTV is to invest in customer loyalty. Thus, you ensure that they continue consuming products and services frequently. To do this efficiently, it is ideal to create a Loyalty Program.
With customer loyalty, the company gains referrals, increased new sales, and increased customer retention time. Without a doubt, loyalty is the safest and smartest path to follow.