The easiest way to calculate the lifetime value of your customers. Now, are you trying to run ads but you don’t know how much you can spend because you don’t know what a customer’s worth? Actual lifetime value will help you figure this out. Maybe you’re spending too much, maybe you’re spending too little but in this video, I’m going to show you exactly how to figure out lifetime customer value.
In theory, this lifetime customer value calculation should be pretty easy, unfortunately, it gets a little complicated and I want to take you through a process of how you can do this and how you can calculate this so you know exactly what your customer’s worth and you can make wise advertising decisions or campaigns based on your advertising dollars. Now, the number one reason people don’t do this is because it’s kind of confusing. These calculations are super easy to do if you break them down into chunks. They can change the variables based on how many weeks, months, and years but basically the formula is always going to be the same.
Here are the variables that you’re gonna need to do these calculations:
05:44 1. Average Order Value
06:20 2. Purchase Frequency
06:37 3. Customer Value
06:54 4. Store’s Average Lifespan
(Customer Lifetime Value Formula)
09:08 1. Customer Lifetime Value Formula including Margins.
9:38 2. Customer Lifetime Value by Segment.
We want to look at based on who that customer is that will not only location or how they came into our sales process but we also want to look at what kind of customer it is so if it’s a loyalty customer they know they’re gonna get certain discounts if they hit certain plateaus then, of course, that may change what they’re buying actions are. You want to take all that into account. You don’t have to make it really complicated. You just use the basic lifetime customer formula that I showed you and you’re gonna be way ahead of everybody else. It’s been proven that only about 5% of all online sellers ever calculate the customer lifetime value and you can get an advantage if you know that your customer is worth more than what the other people think their customers are.
Now, have you calculated your customer lifetime value? Do you have any questions about this? Please put it in the comments below.
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