Lecture on Lifetime Value (LTV) of a Customer

Speaker

• Austin Bronner from Bolded Marketing

Importance of Lifetime Value (LTV)

• Key Marketing Metric: LTV is crucial for developing effective marketing plans.
• Starting Point for Businesses: Calculate LTV before making any marketing decisions.
• Projection Tool: Helps determine future earnings based on current spending.
• Influences Marketing Decisions:
  • Helps decide how much discount to offer new customers.
  • Aids in choosing pricing models.

Definition of Lifetime Value

• LTV: Total amount a customer will spend with a company over their lifetime.
• Benefits:
  • Understands current spending vs. future earnings.
  • Assists in marketing initiatives and customer acquisition costs.

Calculating Lifetime Value

• Formula: LTV = Average Value of a Sale x Number of Repeat Transactions x Average Retention Time
  • Average Value of a Sale: Average purchase amount per transaction.
  • Number of Repeat Transactions: How often a customer makes a purchase within a year.
  • Average Retention Time: Average duration a customer remains with the company.

Example Case Study: Tyler's Shoe Company

• Average Sale: $30.50
• Repeat Transactions: 1.34 per year
• Retention Time: 2 years
• Calculated LTV: $817.24 over customer lifetime

Profit Calculation

• Determine Profit: Consider the business's average margin.
• Example Calculation:
  • Assume 70% margin.
  • Profit = LTV x Margin
  • Example Profit: $572 per customer

Application of LTV

• Assess Customer Acquisition Cost: Determine how much to spend to acquire each customer.
• Investment in Marketing: Guides how marketing budgets should be allocated.

Contact Information

• Further Learning: Visit boldedmarketing.com
• Contact: Email Austin at [email protected] for questions or feedback.

Closing

• Invitation for Feedback: Welcomes case studies and experiences from audience.
• Conclusion: Encourages continued learning and exploration of LTV in business.