What is LTV? LTV stands for Lifetime Value. It’s like a magic number that tells businesses how much money they can make from a customer throughout their entire relationship.

 

Why is LTV Important?

 

1. It Helps You Plan: Even before starting a business, knowing LTV helps you understand your customers better and how much your business can grow.For example, if you’re deciding between selling houses and coffee machines, LTV helps you compare. Selling coffee machines might not seem as fancy as houses, but if you do it right, your LTV could be big.
2. It’s All About Growth: LTV encourages businesses to think long-term and focus on keeping customers happy. Happy customers mean more profits.
3. Spotting Weaknesses: LTV helps businesses figure out what’s working and what’s not. If one type of customer leaves quickly, it tells you something isn’t right.
4. Setting Goals: LTV helps you decide how much you can spend to get a new customer (customer acquisition cost or tCAC). This way, you don’t overspend.

How to Calculate LTV? Here’s a simple formula: LTV = (average order value) x (total transactions) / (unique customers). This helps you figure out your customer’s lifetime value.

 

Improving LTV with PPC: We’ve got four tricks to make LTV bigger using PPC:

 

1. Improve AOV (Average Order Value):

• Don’t just lower prices; focus on value.
• Check if sales periods affect your conversion rates.
• Test different product bundles and landing pages.
• Consider raising prices slowly.

2. Boost Conversion Rates:

• Focus on selling more to existing customers.
• Use targeted ads for people who already know your business.
• Suggest related products to those who abandoned their shopping carts.

3. Shorten the Customer Journey:

• Make sure you send people to the right landing pages.
• Find ways to make the buying process faster.
• Keep customers coming back with great products.

4. Lower Costs (CAC and COGS):

• Spend your money wisely; some ads may not be worth it.
• Improve your ad quality to pay less for each click.

So, there you have it, Grade 6 pals! Remember, LTV is like a secret weapon for businesses. It helps them grow and make more money. If you want to impress people in marketing, ask them about their LTV, not about fancy screens!

 

Setting up a dashboard to keep an eye on your LTV factors is a smart move for any business. See you next time!

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