The customer's average spending per year
Posted: Sat Apr 05, 2025 5:57 am
But how can we calculate LTV to avoid future problems with the audience you already have? Learning how to estimate “Customer Lifetime Value” is a fundamental objective for those who are planning the strategic steps that the company will have to take.
However, there is in fact no unequivocal formula for calculating Lifetime Value, as this parameter varies significantly according to the market in which it operates and the type of product offered, and is also linked to all the marketing factors and dynamics of the sector that may be involved in the analysis.
The elements involved in estimating LTV are actually many and particularly complex, but in order to simplify its calculation as much as possible, we can say that the variables to consider are undoubtedly the following:
The average length of the relationship between the customer and the company;
The percentage profit margin on customer spending.
The most commonly used formula relates them in this way:
Length of relationship x time x average buy phone number list annual expenditure x percentage gain.
Obviously, this simplistic formula is not intended to be exhaustive and does not take into account factors such as customer acquisition cost (CAC), their abandonment rate or recurring purchases (bounce rate on web pages, for example), as well as many other essential parameters to be integrated into subsequent marketing campaigns.
Technology comes in handy in this sense, as you often won't have to manually calculate the Lifetime Value, but it will be the result of integrating the analytical data collected by the company's software used within the organization.
Sophisticated customer relationship management (CRM) software will be particularly useful, as will other monitoring tools and the help of artificial intelligence: extremely valuable supports for obtaining an estimate of how much profit each customer actually generates and, consequently, being able to plan the most correct strategic decisions, both in terms of marketing and finance, as well as general planning.
This was our guide where we explained to you what LTV is. If you still have any questions, just comment below and we will answer them. See you next time!
However, there is in fact no unequivocal formula for calculating Lifetime Value, as this parameter varies significantly according to the market in which it operates and the type of product offered, and is also linked to all the marketing factors and dynamics of the sector that may be involved in the analysis.
The elements involved in estimating LTV are actually many and particularly complex, but in order to simplify its calculation as much as possible, we can say that the variables to consider are undoubtedly the following:
The average length of the relationship between the customer and the company;
The percentage profit margin on customer spending.
The most commonly used formula relates them in this way:
Length of relationship x time x average buy phone number list annual expenditure x percentage gain.
Obviously, this simplistic formula is not intended to be exhaustive and does not take into account factors such as customer acquisition cost (CAC), their abandonment rate or recurring purchases (bounce rate on web pages, for example), as well as many other essential parameters to be integrated into subsequent marketing campaigns.
Technology comes in handy in this sense, as you often won't have to manually calculate the Lifetime Value, but it will be the result of integrating the analytical data collected by the company's software used within the organization.
Sophisticated customer relationship management (CRM) software will be particularly useful, as will other monitoring tools and the help of artificial intelligence: extremely valuable supports for obtaining an estimate of how much profit each customer actually generates and, consequently, being able to plan the most correct strategic decisions, both in terms of marketing and finance, as well as general planning.
This was our guide where we explained to you what LTV is. If you still have any questions, just comment below and we will answer them. See you next time!