What is life time value?

Life time value (LTV) is a metric that social media advertisers use to measure the value of a customer over the course of their relationship with a company. LTV can be used to assess the profitability of acquiring new customers, and to make decisions about how much to spend on customer acquisition.

LTV is calculated by taking the revenue generated from a customer, minus the costs associated with acquiring and servicing that customer, and then divided by the number of months that the customer remains active with the company.

For example, if a company spends $100 to acquire a new customer, and that customer spends $50 per month on average over the course of 12 months, the company's LTV would be $700 (12 x $50 - $100).

Why is life time value important?

LTV is important because it allows social media advertisers to compare the value of different types of customers, and to make decisions about how much to spend on customer acquisition.

LTV is also a useful metric for assessing the profitability of different marketing channels. For example, if a company is spending $100 to acquire customers through Facebook ads, but those customers have an LTV of $200, then the company is profitable.

However, if a company is spending $100 to acquire customers through Google AdWords, but those customers have an LTV of $50, then the company is not profitable.

How can you calculate life time value?

LTV can be calculated by taking the revenue generated from a customer, minus the costs associated with acquiring and servicing that customer, and then divided by the number of months that the customer remains active with the company.

For example, if a company spends $100 to acquire a new customer, and that customer spends $50 per month on average over the course of 12 months, the company's LTV would be $700 (12 x $50 - $100).

What are the benefits of a high life time value?

There are several benefits of having a high LTV:

• It means that your customers are spending more money with you over time, which is good for profitability.
• It means that you're able to spend more money on customer acquisition, because you know that each new customer is worth more to you in the long run.
• It means that you have a loyal customer base that is less likely to defect to a competitor.

How can you increase your life time value?

There are several ways to increase your LTV:

• Increase the amount of money that each customer spends with you over time.
• Decrease the costs associated with acquiring and servicing customers.
• Increase the number of months that each customer remains active with your company.

What are the consequences of a low life time value?

There are several consequences of having a low LTV:

• It means that your customers are not spending much money with you over time, which is bad for profitability.
• It means that you're not able to spend much money on customer acquisition, because you know that each new customer is not worth very much to you in the long run.
• It means that you have a customer base that is likely to defect to a competitor.