To calculate it, take the revenue you earn from a customer, subtract out the money spent on serving them, and adjust all of the payments for time value of money.
Customer lifetime value helps you make important business decisions about sales, marketing, product development, and customer support. For example:
How much should I spend to acquire a customer?
Who are my best customers? How can I offer products and services tailored for them?
How much should I spend to service and retain a customer?
What types of customers should sales reps spend the most time on?
Performing in-depth customer lifetime value analysis is time consuming. You can get a back-of-the-envelope estimate using this easy calculator.
Improving your Customer Lifetime Value can have dramatic impacts throughout your business. Let's see how your estimate would change if you improved the underlying assumptions.
This chart shows how changes in your repeat purchase rate would impact your Customer Lifetime Value.
If you improve your repeat purchase rate and your average order value, you would increase your customer lifetime value.
We help some of the fastest-growing ecommerce and SaaS companies do just that. Let us know if you'd like to learn more.