Know your LTV and get a higher ROI from your Marketing Strategy

What is LTV?

 LTV is the acronym for Lifetime Value. It represents the estimated income that a client can generate for a business during the entire time that they remain as a client.

It is a numerical value that is calculated through a very simple formula. You just have to multiply the average value of the customer's ticket (payment for services or products) by the number of times the purchase or contract is made per year. This result must also be multiplied by the total number of months or years that the client uses what the business in question offers.

Although it is just a figure, it represents one of the most important for any company. The first purchase, so the conversion from lead to customer, is the most difficult step. From there, the purchase index increases, which allows us to better understand this value and determine to what extent the investment has been profitable to attract new consumers.

If the LTV is low and the initiative to convert customers has been very expensive, it is then probably not fully profitable. This parameter should be taken into account when investing in advertising campaigns and other marketing strategies.

What do you need the LTV for?

The LTV helps you to know to what extent a client or a group of these can generate income. Being a numerical value, it allows businesses to carry out profitability studies and, above all, viability when it comes to proposing possible marketing strategies.

Knowing the Lifetime Value is essential for companies. It helps them learn to what extent they can benefit from the consumers they convert into customers, as well as how to act to make them even more profitable. If the value is low, it is an indication that certain factors must be changed to achieve higher profitability.

 LTV Example

To give an example of LTV, I just have to make a practical case. Let's imagine that at Serendipity Marketing, our digital marketing agency, we have an average client who invests a total of £1000 for each service that they get from our company. Also, let’s imagine they come to us a total of 6 times per year.

If on top of this, we consider that they can remain as a client an average of 10 years, we get at a Lifetime Value equal to 1000 x 6 x 10, so to a total of £60,000.

Rely on a leading digital marketing agency London such as Serendipity Marketing Ltd to get the most out of your digital marketing investment and get a better LTV and return on your investment.

CTA – Contact Serendipity Marketing

 

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