Digital MArketing Expert Logo Logo
  • Digital Marketing Strategy
  • SEO Strategy
  • Social Media Strategy
  • PPC Strategy
  • Flex Hours

Calculating Lifetime Value

  • Home
  • /
  • Uncategorized
  • /
  • Calculating Lifetime Value

Calculating Lifetime Value

By Admin

  • 2
  • Conversion Rate Optimization , Uncategorized ,
  • 20 Mar

Customer Lifetime Value
Customer Lifetime Value

Understanding the lifetime value of your customers is a good first step for creating profitable digital marketing campaigns. For many businesses, Pay Per Click is the top revenue source.

The question is, how do you know if your campaigns are actually making money? Yea, it’s nice if you can turn an immediate profit off of your ad spend, but not every business sees a day one return-on-investment.

Here is how you can calculate your customer lifetime value (LTV).

Calculating Customer Lifetime Value

In marketing, customer lifetime value is defined as a prediction of the net value (typically revenue) attributed to the entire relationship with a customer.

So, if T= average monthly transactions, AOV = average order value and ALT = average customer lifespan (in months), then:

Customer LTV = [T] x [AOV] x [LT]

There are a  few other ways, to calculate LVT.  This quick and dirty calculation will give you a good feel for your customer LTV and the profitability of your digital marketing campaigns.

Why Your Customer LTV Matters

In many industries, it can difficult to drive a first purchase profit from digital marketing.

Unlike conventional advertising, in digital marketing you typically use pay-per-click. With a billboard, you pay a fixed amount regardless of how many people see your sign. With PPC advertising, the more people that click on your ad, the more you pay.

However, because every interaction with your ads happens online—where everything can be tracked—you know exactly which ads, campaigns, keywords and clicks produced which conversions and sales.

As a result, it’s fairly easy to figure out whether or not your ad spend is producing value for your business using your customer LTV.

Using Your Customer Lifetime Value

There are several ways this is going to help you but, once you know your customer lifetime value, you can use it to figure out where your business needs to improve to become more profitable.

For example, if my client’s average customer only lasted 1 year but the industry average was 3 years, they could focus on improving their customer lifespan.

Overall, your customer lifetime value is an incredibly important way to assess the effectiveness of your digital marketing. Sometimes, what initially looks bad could actually hold tremendous value.

If you’d like to calculate your customer LTV and get a free audit of your marketing results, let me know here. I’d love to help!

Certified Google Partner Agency

Try Google Workspace 14 Days Free

Certified Microsoft Partner Agency

Protected By McAfee

    Recent Posts

  • Create Your Complete Marketing Strategy

    21 November 2019

  • How To Build An Effective Conversion Rate Optimization Strategy

    16 May 2019

  • Calculating Lifetime Value

    20 March 2017

Menu

  • Digital Marketing Strategy
  • SEO Strategy
  • Social Media Strategy
  • PPC Strategy
  • Flex Hours

Customized Digital Marketing Strategy

Get Started Free!

Dashboard Log In
Digital Marketing Projects
Web Portfolio

Website Development & Digital Marketing Strategy By Chad Lapointe Enterprises LLC, DBA Digital Marketing Expert