How much is a customer worth?

Did you know it costs $50 per click to bid on “printer” keywords on Google? Most manufacturers lose money on the first sale, because they know you’ll buy the ink.


LTV Calculation

Working out your customer lifetime value (LTV) is key to operating in a competitive advertising environment...More


Mike Taylor

Built a 50-person growth agency.
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Excel experience recommended.
1. Scenario
GOOLYBIB HQ – Budget Meeting
Your boss wants to know how much a customer is worth to you. Once you know that you can use it to justify the extra budget you asked for.
Gustav Gieger
at GoolyBib

I know we’re getting outcompeted in the ad auction

But I’m not comfortable letting you go over our CPA target unless we know how long it’ll take to pay the extra back.

As far as I’m aware most of the revenue comes from first orders

So I’m open to seeing some analysis, but unless it’s more than 10% extra revenue coming from repeat purchases in the first few weeks…

I’m not sure we can revisit the budget question

This course is a work of fiction. Unless otherwise indicated, all the names, characters, businesses, data, places, events and incidents in this course are either the product of the author's imagination or used in a fictitious manner. Any resemblance to actual persons, living or dead, or actual events is purely coincidental.

2. Brief

Understanding customer lifetime value (LTV) is essential for any business that wants to be successful in a competitive advertising environment. Calculating LTV helps you understand how much you can afford to pay for a new customer, and how much money you need to generate in order to make a profit.

The first step in calculating LTV is to determine the average customer lifetime, which is the total amount of time a customer spends buying your products or services. To do this, you will need to look at past sales data and analyze the amount of time it takes customers to make a repeat purchase. This data can provide valuable insights into the typical customer purchase cycle.

Once you have the customer lifetime, you can then calculate the total revenue per customer. This is done by multiplying the average customer lifetime by the average purchase amount and the number of repeat purchases. This is an important figure, as it will give you a better understanding of how much money each customer is worth over the course of their lifetime.

You can then use this figure to calculate the customer lifetime value. To do this, you will need to divide the total revenue per customer by the customer acquisition cost. This will give you the dollar value of each customer.

Once you have the customer lifetime value, you can use it to better understand how much money you can afford to pay for a new customer. You can also compare this figure to your customer acquisition costs to determine whether your marketing strategy is effective. If you find that your customer acquisition costs are too high, you can adjust your marketing strategy accordingly.

By understanding customer lifetime value, you can ensure that you are spending your advertising dollars wisely and optimizing your efforts to bring in more customers. Additionally, it can help you better understand the value of your existing customer base and the impact of any changes you make to your marketing or product offerings.

3. Tutorial

00:01 Hey, let's figure out how to calculate lifetime value. So there's obviously ways to do this in code and you know, recommend that you learn SQL or Python to do that if you are doing something in a backend database.

4. Exercises
5. Certificate

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