Calculating LTV involves several steps and metrics:
Average Purchase Value (APV): Calculate the average purchase value by dividing total revenue by the number of purchases. Purchase Frequency (PF): Determine how often a customer makes a purchase within a given time frame. Customer Lifespan (CL): Estimate the average duration a customer remains active. LTV = APV x PF x CL
For example, if the average purchase value is $50, the purchase frequency is 5 times a year, and the customer lifespan is 3 years, the LTV would be $50 x 5 x 3 = $750.