Lifetime customer value is a metric that tells you the total revenue you can expect from a single customer over the course of their relationship with your business. It’s about understanding the long-term value of your customers, rather than focusing on individual transactions.
Now, how do we calculate this number? The formula is quite simple: “average sale per customer” multiplied by “average number of times a customer buys per year” multiplied by “average retention time in years for a typical customer.” This equation allows you to see the bigger picture of customer worth, rather than just a snapshot of one-time sales.
Lifetime Customer Value = Average Sale per Customer x Average Number of Times a Customer Buys per Year x Average Retention Time in Years for a Typical Customer
Here’s why it’s crucial:
- It can help you make informed decisions about how much money to invest in acquiring new customers.
- It can aid in predicting future revenue, providing a more realistic picture than single-sale measurements.
- It can guide you in creating personalized marketing strategies, improving customer retention and maximizing profit.
Lifetime Customer Value Calculator
The values you enter into this calculator are not saved or stored in any way.