Chargebacks911® COO Monica Eaton’s New Guest Feature for Forbes
Monica spoke to the importance of calculating your average customer’s lifetime value (LTV) with the latest entry in her monthly column for Forbes. In the post, Monica relays the role LTV plays in your bottom line, why customer retention is so important.
What is Customer LTV?
Customer lifetime value is an indicator of how much a customer is anticipated to spend through all their total lifetime interactions with a merchant. As Monica explains, “LTV takes the total amount a customer spends, then stacks it against the resources and time you direct at them at the sales stage, plus the cost of retaining them. Ideally, you have a margin of profit generated compared to the cost. Otherwise, it’s generally not worth the investment -- even if a prospect eventually becomes a buyer.”
As a member of the Forbes Technology Council, Monica is invited to weigh-in on critical issues currently facing the market. Surprisingly, using LTV to determine appropriate spending on customer acquisition is an underutilized indicator.
Lifetime value is an important key indicator for appropriate spending. Without it, you may end up spending far more to acquirer customers than is appropriate.
“Failing to monitor customer LTV puts you in a terrible position from a marketing standpoint,” she says. “You’re essentially flying blind, with no gauge to determine the right amount to spend to bring in and retain customers. You could also use an unrealistically optimistic projection for customer spend and end up over-calculating the lifetime value of a customer. In either case, you stand a very good chance of overspending and seriously impacting your profitability and long-term business sustainability.”
