How to Determine Life Time Value

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Information about How to Determine Life Time Value

Published on March 7, 2014

Author: amitaisasson9



People always ask me how to calculate Life Time Value of a customer segment.

The truth is that there are many ways to calculate this. It depends on your business model and recency and rate of repeat orders.

LTV Inputs Segment 50,000   Year 3 Year 4 Year 5   Year 2 Year 1     $78.00         Retention Rate 20% 8% 5% 3% 2% Orders per Year 1.39 1.46 1.50 1.42 1.57 Average Order $208.82 $239.85 60% 59% Acquisition Cost Gross Profit $265.28 $215.59 $242.38 62% 60% 58%

LTV Results Total Customers Revenue per Customer Gross Profit per Customer LTV per Customer Year 2                   50,000                    10,000  $290.26 $350.18 $397.92 $306.14 $380.54 $174.16 $206.61 $246.71 $183.68 $220.71 Year 1   Year 1 Year 3 Year 4 Year 5 Year 2 Year 3 Year 4 Year 5 $174.16 $215.48 $235.21 $244.40 $251.02                                                                4,000  2,500  1,500 

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