What lifetime value really tells you

Hi,

Lifetime value gets thrown around like a badge of honour. "Our LTV is huge." Lovely, but on its own the number tells you almost nothing. It's what you do with it that matters, and most stores never get that far.

It's a decision tool, not a trophy

The reason LTV is worth knowing is that it tells you how much you can afford to spend winning a customer, and how much a repeat buyer is really worth keeping happy.

Once you know it, a lot of arguments settle themselves:

• How much you can pay to acquire a customer and still profit
• Which products bring people back versus which ones don't
• Whether a discount to a loyal buyer is generous or reckless
• Where retention effort pays back fastest

Suddenly "should we spend on this?" has an actual answer.

Averages hide the good stuff

A single blended LTV across all customers is nearly useless. The interesting story is in the spread.

Your best customers and your worst customers are averaged into the same tidy number, and that number describes nobody. Split them apart and the whole business gets clearer.

Look at LTV by acquisition channel and by first product bought. You'll often find one channel brings cheap first orders and no loyalty, while another costs more upfront but pays back for years. That changes where you'd sensibly spend.

You don't need a fancy model to start. A rough figure you actually use beats a perfect one that lives in a slide nobody opens.

If you'd like a straightforward read on your LTV and what it says about where to spend, start with a FREE call and we'll go through it together.