How to Calculate and Use Your Customer Lifetime Value to Increase Sales

Monica Eaton-Cardone Discusses an All-Important Calculation for StartupNation

In her new guest feature for StartupNation, Chargebacks911® COO Monica Eaton-Cardone explains the merit in calculating your customer lifetime value, or LTV. This single figure could mean the difference between profitability and going bust.

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As the name implies, your customer LTV is the total amount you can expect an average customer to spend with you over the course of that person’s life. As Monica explains in the post, few figures are as integral to your business’s success.

“LTV should be considered when determining budgets for advertising, design, market research, operations, fulfillment and customer support,” she says. “This simple calculation helps determine the best strategy to invest in promotions, loyalty programs and other methods of retaining buyers…eCommerce retailers that fail to monitor LTV have no reliable, objective guidelines for how much to spend on acquisition and retention.”

Of course, Monica is careful to note that it’s not all about acquiring customers. “Retaining and building up a loyal base of customers is one of the best strategies for growing a retail business. Increasing customer retention by just 5 percent can increase profits by 25 percent to 95 percent. Not only that, acquiring loyal customers means you’re building up a base of individuals who have faith in your operations.”