Real-world example: Using Daasity's visualizations, intimates brand Harper Wilde found that their customers who ordered non-underwire bras as their first purchases had higher LTVs than those who ordered underwire bras. ![]() ![]() Acquiring customers that lead to a higher LTV over time gives you more bandwidth to more heavily invest in new customer acquisition and accelerate your growth. With this data, leverage product X for acquisition. Insights: Analyze customers who bought product X compared to those who didn’t to help you determine which products/product categories lead to higher CLV for a specific time period. ![]() You also may want to promote those products/product categories more heavily. If you can understand some of the characteristics these customers share, you can tailor your marketing to acquire similar customers. LTV by first product (or SKU) purchased: It’s also useful to break out LTV at the product level, as you may find that customers who buy certain products or categories of products tend to stick around longer and purchase more than average. LTV by first product (or SKU) purchasedĪll LTVs shown, but 1 or more can be selected for individual looks or comparisons.Visualizations need context to be truly valuable, and for that, you need to compare several curves on a single graph to find the golden nuggets. Below are three LTV visualizations/breakdowns to track (and that Daasity provides): We recommend using visualizations to look at segments. For example: are our customers profitable? Are they profitable enough compared to their acquisition cost? Is our CLV trending up or down? Are our more recent customers better or worse than customers we acquired last year?īeyond average customer lifetime value, there are ways to segment on an CLV basis that you can leverage in your business. With a clear understanding of your CLV through visualizations, you can easily answer a number of questions. What customer lifetime value visualizations tell you about your business This is just one example of how if one portion of this calculation is off it can greatly impact the takeaway.Īt Daasity, we aggregate all your data in one place, automatically update it every day, and provide these out-of-the-box CLV visualizations for you to assess your brand's performance. While this will give you some useful information, not knowing true gross margin at a product level prevents you from gleaning insights to inform more effective (and scalable) pricing and marketing strategies, such as for promoting higher margin products. When you are calculating customer lifetime value manually, you may, for example, assume a standard percentage to calculate gross margin across all your products. Visualizations allow you to quickly understand what's going on with your business. For example, if you think that you are going to make $100 in gross margin from the average customer over a 12-month period (when you’re actually only making $75 in profit), it greatly impacts how much you can afford to invest in marketing. This is an inaccurate calculation of gross margin, and it can cause major problems in understanding how much you can invest in growth. Many brands calculate CLV as revenue minus product cost. Many companies end up relying on these metrics without realizing it because they don’t understand how to calculate CLV.Ģ. Respectively, these metrics are lifetime revenue (LTR) and predicted revenue. It is not total sales or predicted sales value. We see confusion around CLV because it is labeled and calculated in a variety of ways, almost all of which are completely or partially incorrect.ġ. In a nutshell, customer lifetime value tells you how good you are at retaining customers who purchase more than once, and although it does not indicate true profitability (i.e., net profit), it is a necessary profitability metric to guide decisions. Gross margin is your net sales minus your SKU costs. What is customer lifetime value?Ĭustomer lifetime value is gross margin per customer over their lifetime with your brand or for a particular cohort. We'll cover what it is (and what it is not), how to calculate it, how to analyze it, how to increase it, predictive LTV, LTV:CAC, and more. We've built this guide to provide an authoritative resource on a variety of LTV topics. ![]() Customer lifetime value (a metric of many abbreviations, including CLV, LTV, and CLTV) is fundamental for consumer brands to understand, track, report on, and work to increase over time.
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