LTV: What is this metric, how to calculate it and can it be managed

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Poison Drop, The Cave, Ruketo and other RetailCRM clients shared their experience on how to increase LTV
02/28/2024 ⏱ 14 minutes
LTV Management
LTV, Lifetime Value, Customer Lifetime Value or "lifetime value of a customer" - all this is one metric. It shows how much profit a buyer brought to the company over a certain period or over the entire interaction period.

In this article, we will tell you how and why to latvia phone numbers calculate LTV, whether it is possible to manage the metric and how to increase this indicator.
What is LTV and why is it important to calculate it?
How to calculate LTV
Is there a norm for LTV?
When LTV can be ignored
Ways to Increase LTV: RetailCRM Client Experience
What is LTV and why is it important to calculate it?
LTV is one of the key indicators for evaluating marketing effectiveness. The metric helps to understand whether the costs of attracting and retaining customers pay off.

Here is how LTV helps a business or what can be done if you have the metric at hand:

Identify the most “profitable” customers and motivate them to buy again and again. For example, one of your customers made an order for 10,000 rubles and did not buy again. This means that his LTV will be 10,000 rubles. Another customer buys goods for 1,500 rubles twice a month during the year. The result is a small average check, and a higher LTV. Here is why: 1,500 * 2 * 12 = 36,000 rubles. To retain both customers, you can work on a sales strategy: motivate customer #1 to make a repeat purchase with a discount, and offer customer #2 related products and increase the average check. Calculate customer quality. The metric shows how profitable the customer is for the company. It is calculated using the formula: LTV / CAC, where CAC is the cost of attracting a customer. The formula for calculating CAC (Customer Acquisition Cost):