HOW DOES THE CALCULATOR WORK?
Avg. Order Value:
How much money do you make on average, every time they purchase your products or services?
Number of Orders per month:
How many times will your customers purchase a product or service per month? (on average)
Number of months your customers will remain loyal:
For how many months will your customers will remain loyal to your business? For example, the average Starbucks customer will stay loyal to the brand for almost 20 years! or 240 months.
Cost to acquire your customer (CPA):
How much do you have to spend on marketing and advertising activities to acquire a customer? In other words, what is your average cost per acquisition (CPA)?
A single customer often purchases your product or service more than once. Think about how many times do you go to a nail salon? or a hairdresser? over a year's time? and how many times do you purchase the same shampoo? The answer is always more than once. Customer lifetime value allows you to quantify the big picture.
For example, Starbucks estimates that the average lifetime value of their customer is $14,099. This means that even if they spend $14K to acquire a single customer, the company will still remain profitable in the long term.
Remember that some of your customers are more profitable than others. The Pareto principle (also known as the 80/20 rule) suggests that 80% of all your revenue comes from 20% of your customers. As a business owner you need to understand which customer segments can give you the highest returns.
Try our FREE Digital Marketing Calculators