LTV marketing – definition

LTV marketing (LifeTime Value marketing) is a marketing strategy that uses the long-term (lifetime) value of a customer, which is calculated by taking into account the value of all transactions that a given customer has ever concluded with a specific company.

The indicator used in LTV marketing allows you to precisely determine how much profit a single customer brings. Knowing this value, you can properly select specific marketing tools to attract and retain customers with the highest potential. The LTV ratio also helps determine how much you can invest in acquiring a new customer to make it pay off in the long run.

LTV marketing allows you to focus on building long-term relationships instead of focusing solely on one-off transactions. It helps you understand the long-term value of your customers, which allows you to better construct your marketing plan. LTV marketing is not so much a separate strategy, but a key element of any marketing strategy that assumes effective management of customer relationships and achieving constant profits.

LTV marketing – interesting facts

LTV marketing is based on an in-depth analysis of customer behavior, their purchasing habits, the average time to close a transaction and the value of purchases made. Knowledge in this area makes it much easier to personalize the offer and better match it to a specific customer or group of customers.

Focusing marketing activities on the value of customer life allows you to effectively build relationships with customers, including their loyalty to a given brand's products. As analyzes show, customers loyal to a given brand are much more willing to share their orders and recommendations on the forum.

LTV marketing allows you to use various marketing and sales instruments to increase the lifetime value of a given customer. They include:

• offering products that complement or match an already purchased product,
• introduction of subscription or subscription services,
• offering product sets,
• maintaining contact with the customer by regularly sending newsletters or text messages,
• Loyalty programs.

LTV marketing – information worth knowing

There are different types of indicators used in LTV marketing:

• general – calculated as the average customer value (the sum of the values of all customers divided by the number of customers),
• by segments – calculated in individual segments,
• by marketing channels – showing which marketing channels bring the highest benefits per customer acquired from this channel.

Although calculating marketing LTV metrics is time-consuming, the effort is worth the effort. By focusing on activating the most valuable customers and using mechanisms that have proven effective in their case, it brings constant profits with a relatively low investment outlay.

LTV marketing is based on the assumption that specific customer behavior is repeatable, but you should always remember that this assumption does not always work, especially in the case of a dynamically changing market. Although LTV marketing recommends focusing on the most promising customers, you should remember to never neglect acquiring new customers when planning your marketing activities.

LTV marketing – summary

LTV marketing assumes that being aware of exactly how much the company has earned on transactions with a given customer, as well as knowing his or her purchasing preferences, habits and needs, we are able not only to forecast further sales, but also to use mechanisms to build long-term relationships with others, similar customers.

Understanding the importance of marketing LTV is crucial to a company's success because it allows you to optimize marketing and sales processes, which directly translates into better financial results. Identification of the most valuable customers allows for much more efficient allocation of resources. However, the key to success is balance and care for each group of customers, regardless of their value or potential.

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