LTV in marketing is a metric that is often underestimated. And the success of the business directly depends on it. After all, attracting new clients is now super-expensive. Therefore, the main task of every company is to make the relationship with existing customers as long-term as possible. This is where the LTV indicator comes in. Learn about CLV meaning and definition, how to measure customer lifetime value, and how LTV analysis can help your business.
What is Customer Lifetime Value?
First, let’s figure out what LTV is. LTV (aka Custo telegram database mer Lifetime Value, CLV) is a metric that can be used to estimate the profit that a customer brings to you over the entire period of interaction: from the first to the last purchase.
Your company's revenue depends directly on this metric. To put it simply: the more loyal customers you have, the higher the revenue. But it is important to correlate this metric with others in order to see the real picture. So, if you have a high LTV, but the cost of attracting and retaining it exceeds a certain number, then there is no profit for you today. You need to reconsider your strategy.
The LTV is actually an indicator of how effective your marketing works. Because at the end of the day the main task of marketing is to build up as many loyal clients as possible and to keep them engaged as long as possible.
LTV is a valuable metric for marketing analytics. The cost of attracting new customers, order quantity, and conversion rates, are also matters of high importance for your future income. But lifetime value combines all the statistics for each individual customer. It's the expected profit you make. With the right calculations, you can easily expand your business based on this metric. And you won't lose any money because you'll know exactly how much you're making.
It drives repeat sales and revenue
By performing CLV analysis, you can flexibly manage business relationships that lead to increased business profitability. In addition, you'll be able to make better decisions and spend less time and money on attracting customers with a lower value. LTV will also help you assess product quality, highlight strengths and weaknesses, and comprehensively work through them to increase customer retention.
It boosts loyalty
If you know who brings you the most money, you can pay more attention to them. And you can also find common characteristics between these people and try to attract similar new customers. That way you can build separate strategies to work with each group and develop tailored offers for them.