How to Calculate and Grow a Strong Customer Lifetime Value

By The Good
1 minute read | Last Updated: July 6, 2018

Customer loyalty and lifetime value go hand in hand, and have a direct impact on your bottom line. Here’s how to calculate and maximize your LTV, thereby increasing revenue.

You’ve heard of Customer Lifetime Value (LTV). You know that it’s important and that companies who can increase overall LTV can significantly increase their bottom line.

You’ve probably even heard the stats, like that the top 1 percent of ecommerce customers are worth a whopping 18 times more than the average customer. You know that approximately 80 percent of your future revenue will come from 20 percent of your most loyal customers, and that increasing customer retention rates by 5 percent can result in an astonishing 25-95 percent increase in revenue.

You’ve also heard that LTV is critical for calculating metrics such as desirable customer acquisition cost; but how does one calculate Customer Lifetime Value?.

In this post, we’re going to break down:

  • What Customer Lifetime Value actually is
  • Why it matters so much to your ecommerce store
  • A simple way to calculate your LTV
  • Ways to improve and increase your LTV

By the time we’re done, you’ll be able to attend ecommerce cocktail parties (or perhaps even conferences) and sound like a seasoned vet as you discuss LTV.

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