Meaning of LTV - Fin-Tech

LTV (Life Time Value) is an indicator of the profit that can be obtained from a single customer over the long term.

Generally referred to as “customer lifetime value,” it analyzes and calculates the current value of a single customer based on the expected future profits that the company will receive.

LTV is especially important when dealing with products that are purchased continuously on a daily basis, such as daily necessities, health foods, and cosmetics, as well as for services that are charged monthly, or for subscriptions that charge a flat rate and provide services for a certain period of time. It can be an important

marketing

metric.

Advantages of calculating LTV

Why do you need to calculate LTV? Let’s take a look at its benefits.

For measures to maintain and expand existing customers

In order to avoid losing customers to competitors, you need to calculate LTV and understand the value of your products and services to customers. It is necessary to systematically implement measures to get customers to continue purchasing or to purchase other products. Measures will only yield results if they are implemented strategically. For this reason, calculating LTV, which serves as an indicator, is a major premise.

A philosophy of valuing existing customers is born.

If you focus too much on acquiring new customers, you may end up selling out or responding on an ad hoc basis. However, the reality is that it is difficult to gain long-term trust from customers if you respond on an ad hoc basis. Therefore, by calculating the LTV and working to improve it, a mindset of valuing existing customers will emerge, and a tendency to value communication and support will emerge. It is said that LTV calculation has such philosophical meaning.

You can identify when customer satisfaction has decreased

LTV is closely related to customer satisfaction. Naturally, if the LTV value decreases, it is usually assumed that customer satisfaction also decreases. Therefore, if you calculate LTV regularly, if it goes down, you will notice that customer satisfaction has gone down, making it easier to discover the cause of the downturn. If problems are detected early, it will be easier to implement countermeasures. You can quickly restore and improve customer satisfaction.

In this way, there are various benefits to calculating LTV and visualizing it as a numerical value.