Customer Life-time Value

Getting Started With Customer Lifetime Value 

The goal of LTV is to evaluate the total value of a customer cohort. With the integration of Google Ads, you now have an additional avenue to determine the cost of enhancing Customer Lifetime Value.

This information is important because it allows you to calculate the ROI of the marketing campaigns used to acquire the customers in question. Once you have an ROI, you can compare it to the ROIs of other marketing campaigns to see which one is more effective, or track it over time to keep tabs on changes. 

Here's how you can start tracking LTV with By the Numbers: 

1) Select LTV from the left-side menu 

You should now have a report visible on your screen:

This report tells you a few key pieces of information:

  • Monthly Cohort: A group made up of customers who made their first purchase in that given month.
  • LTV: (Current Value) + (Future Estimated Value)
  • Actual Value: Gross sales for this cohort to date.
  • Predicted Value: Estimated future sales for this cohort.
  • Customer Return Rate: The percentage of customers that returned within a timeframe.
  • Average Lifespan: Expected Average Lifespan of a cohort in months. 
  • Average Order Value (AOV): The total sales divided by the number of orders.
  • Order Frequency: The average number of orders placed by the cohort this month.
  • Clicks: Interactions with your ad. Counted even if users don't reach your site.
  • Impressions: Times your ad appears on Google search results. Low counts may indicate visibility issues.
  • Clickthrough Rate (CTR): A measure of your ad's performance, Clicks divided by impressions. E.g., 5 out of 100 = 5% CTR.
  • Cost: The combined total of your cost-per-click (CPC) and cost-per-thousand impressions (CPM) expenses over a given period across various ad campaigns. 

2) Select Segments from the customer tab

You should see something like this:

Along with the usual Segment details like AOV and Order Frequency, we now display the Average LTV. This shows how much money the average customer in that segment is predicted to spend with your store over the course of their customer lifetime. In contrast, Customer Value tells you how much money the average customer in that segment has spent with you.

3) Select “View Customers” from any segment (custom or preset)

You should see something like this:

Customer details now include the LTV of each individual customer as well as their total sales. The LTV shows how much a customer is expected to spend while Total sales show how much they have spent with you.

4) Create a custom Segment using LTV

LTV (total amount) Filter

When creating a custom Segment you can select LTV from the Filters dropdown. You should see something like this:

This gives you the ability to filter for customers whose Total Lifetime Value is above or below an amount you decide.

LTV by Percentile Filter

The LTV by Percentile filter allows you to segment customers based on their LTV percentile. This means that you can select customers who have an LTV that is higher or lower than a certain percentage of all customers.

For example, if you select the 95th percentile, you will be filtering for customers who have an LTV that is higher than 95% of all customers.

This is a great way to identify your most valuable customers and target them with marketing campaigns or other initiatives.

5) Select Loyalty from the left navigation bar

You should see something like this:

Customer details in the loyalty squares now include LTV for each group. The LTV shown is an average of what the current group of customers is expected to spend.

What Can You Do With This Information?

Whether you're looking at LTV for segments or cohorts, it helps you predict the total value a customer will bring to the business. The higher the Customer Lifetime Value (LTV) the more money a customer will bring to the business on average over the entire time they remain a paying customer.

There are a few ways you can use this information:

  • Adjusting marketing expenditures. LTV can help you realize when you're spending too much or too little on marketing to a particular kind of customer. 
  • Pricing products or services. LTV can help you price your products or services in a way that is sustainable and profitable for your business.
  • Informing product development. LTV can help you make decisions about which products or features to build next.
  • Optimizing retention marketing.  LTV can help you decide how much to spend on customer retention activities by showing you which segments are most likely to stick around.

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