The Benefits of Determining the LTV Index in Online Marketing

[subornaakter20]

What is the LTV index? It is an indicator that shows the profit that a company has received from a specific customer during his life cycle. If you take the time to calculate this index, you can understand how much money you need to allocate to attract customers and still have income.

The abbreviation LTV is deciphered in different ways:

LTV – customer life cycle;

LTV – lifetime value of a customer;

LTV is the amount of money spent on dental email list purchases from a specific seller over the entire period of interaction with him.

The customer life cycle in the context of LTV calculation looks like this:

he makes his 1st purchase;

he makes a 2nd purchase;

he makes a 3rd purchase;

he makes his 4th purchase;

he makes his 5th purchase;

…

the customer stops making purchases.

Actually, LTV is the time interval between the beginning and the end of the cycle, the period of interaction between the client and the company, the amount that the buyer spends on goods. However, this is a very exaggerated explanation. If you approach the issue seriously, you need to start making calculations from the moment the consumer saw the advertisement and came to the store, because you cannot exclude expenses on it.

If a company operates online, it is imperative that it understands what the customer lifecycle LTV is and be able to measure this metric. Here are some factors that demonstrate the importance of using LTV:

Increase ROI

Focusing on LTV will allow you to identify a group of customers who bring the company the main profit, and find ways to attract this category, advertise taking into account the gender, age, and preferences of the target audience. It is important to optimize sales in the long term, rather than count on random profits from one-time purchases. It is necessary to increase LTV, keeping in mind the funds spent on attracting customers (LTV:CAC). Understanding the customer life cycle will help make the business more meaningful and effective.

Increased focus on the customer retention stage

The development strategy of any company should involve turning potential customers into real ones, and customers who have made a one-time purchase into regular ones. And all this should happen with the goal of increasing LTV.

To understand how LTV usage impacts customer behavior, an in-depth analysis over time is needed.

Increasing the effectiveness of advertising campaigns

Assessing LTV will help you segment your customers into groups and develop an advertising campaign that is tailored to a specific target audience – the one with the best purchasing performance. This will increase its effectiveness.

Improving the efficiency of management methods

Analyzing the customer base and dividing buyers into segments will help identify common features of each group and the most successful management methods. They, in turn, will help in the work of attracting new customers.

Improving customer support

Based on the Pareto principle, special attention should be paid to the 20% of customers who bring the most profit to the company. By studying and assessing the customer life cycle, you can determine who is in this 20% and work with them individually.