Knowing your customer lifetime value is important!

Lifetime ValueLifetime Value (LTV) is the essentially the income/revenue that once a customer is aquired they will contribute to your business during the period of time they remain a customer and continue to buy from you.

So, why is lifetime value important

Knowing the contribution that an average customer makes to your bottom line enables you to set a marketing budget for the acquisition of new customers.  Or, put another way; how much you can spend to buy new customers!

Knowing LTV helps you see how profitable your customers are and how much you can confidently spend to acquire them.

Customer Satisfaction

Happy customers are satisfied customers and research shows that by increasing your customer satisfaction by 5% can increase profits by upto 25%. It can also cost upto 7x more to get a new customer than keep a happy & satisfied one.

The infographic below gives an analysis and breakdown using Starbucks as an example.

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How To Calculate Customer Lifetime Value
Source: How To Calculate Lifetime Value

It may appear a complicated process but making the effort to identify your customer lifetime value, rather than being a cost, should be seen as an investment in your business success.

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