Use data to model and predict customer lifetime value
Lifetime Value Modeling
Lifetime value (LTV) modeling is one data analytics tool that is creating a big impact on revenue for small and medium-sized businesses. Customer LTV is a prediction of the net profit that the customer is likely to bring to the company.
Whether retail, ecommerce or another industry, using data to calculate and predict customers’ LTV is helping companies to optimize business strategies, define growth, identify net profit and predict future sales. View the example Customer LTV Matrix below to see how data modeling can predict customer LTV.
How to Set Up Customer LTV Monitoring
1. Set Goals and Parameters
Does your company want to have an updated LTV every single day, week or month? Does it make sense to start modeling from the acquisition date? What is the most strategic timeline for your business to track customer LTV? 30 days later, 60 days later, 90 days later or by month?
2. Segment your Customers
Does your business offer subscriptions or memberships? If so, you can calculate LTV for subscribers/memberships vs nonsubscribers or members.This can inform strategy to increase subscription sales.
3. Analyze
Companies like Parallel Analytica calculate LTV for our clients based on what is most important to them. This is done by using near real-time transaction data to constantly update every single customer’s LTV multiple times a day. We work closely with our clients to set them up for success and make adjustments as goals change.
4. Report
A business can then use automated reports, for example in Tableau or Power BI, to monitor customer LTV. This is sometimes done by a marketing manager and is an important step to identify changes and inform sales and marketing strategies.
5. Re Engage
Using this system and the reports it creates, sales teams can plan new campaigns. For example, one LTV report might identify the last purchase price and date, indicating which customers might be ready to make another purchase or informing your business strategy in offering discounts or promotions.
Boost Efficiency with LTV Modeling
LTV modeling is one of many ways that data analytics is changing business for small and medium-sized companies in many different industries. There are so many tools and companies in the data analytics market, it can be difficult for small and medium-sized businesses to know where to start. Parallel Analytica meets clients where they’re at in their data analytics journey, we make your existing tools more efficient and we help inform your data analytics strategy.
Schedule a consultation today to find out how Parallel Analytica can help your organization unlock insights using your own data.