Lifetime Value Concept
What is the Lifetime Value or LTV?
The Lifetime Value, which is also called LTV, is the value of income generated by a client to a firm or company over time that uses its services or products. That is, it is all the money that it generates, measured in net, and that a signature obtains throughout the life cycle of a user as a customer.
It is a measure that is previously estimated, before a lead or a simple visitor becomes a consumer of the brand. Decidedly, it does not have all the feasible accuracy, since there are many factors that intervene in this customer cycle, but it does help to make a good estimate of the money that can be obtained thanks to it, something that serves to establish if a product enjoys of a good price or must move to better adjust to certain benefits.
Today there are several formulas that are used to measure the LTV of a user, even though the most widespread is as simple as you will have the option to see below: LTV = Level of purchase recurrence (in a year) x average expense per purchase x life of the client (years that he is a client).
It is one of the most important values to measure the profitability of a business, as well as one of the most variable around it.
What is the Lifetime Value (LTV) for?
The LTV is used to assess whether the current business model of a firm is sufficiently profitable or if, on the contrary, it must rethink its commercial strategy to enjoy good commercial health. Help to reinforce interest in maximizing the money invested by the client during its life cycle, as well as to improve user retention strategies.
Well understood, at the same time as a meter, it serves to find how to reinforce different points of the company in order to reach an acceptable index. If they are already, it can serve as a proof in the future to assess whether they are simply maintaining the business well.
Examples of Lifetime Value or LTV
We are going to think of a client who would hire the services of NeoAttack content marketing. It is feasible that, based on previous experiences, we could determine a life time of about 6 years as a client, in which a total of 3 times a year would use our services with an average cost of 300 euros. This, doing some simple math, would translate into a total of 5,400 euros during your entire cycle as a customer (according to these fictitious figures).
That would be your LTV and that would be the net income to buy with the customer's acquisition cost to assess if the margin is the most appropriate.
More information about the Lifetime Value or LTV
Interested in learning more about the Lifetime Value or LTV? In that case, take a look at the links below to learn more about this meter.
