Episode #382
How to Determine Customer Lifetime Value
August 17, 2017

In Episode #382, Eric and Neil discuss how to determine customer lifetime value. Tune in to learn the simplest formula you can use to calculate your customer lifetime value. Eric and Neil also drop several online tools that simplify the process and will do the math for you.

Time Stamped Show Notes:

  • 00:27 – Today’s topic: How to Determine Customer Lifetime Value
  • 00:38 – There are multiple ways to determine customer lifetime value
  • 00:52 – Eric shares an example of a SaaS company’s customer lifetime value
    • 00:55 – Neil’s Crazy Egg has a churn of 10%, which is the number of customers who stopped using the product
    • 01:08 – Average price per user ID is $30, so you divide $30 by the churn to get the lifetime value
    • 01:40 – Technically you take the average pay per month
  • 02:00 – Mixpanel can calculate your customer lifetime value
  • 02:10 – RJMetrics can do it for you, too
  • 02:21 – There’s a formula on Kissmetrics that you can copy to calculate the customer lifetime value
  • 02:31 – Eric has tried different formulas and the one on Shopify’s blog is one worth checking out
  • 02:50 – You can do the formula yourself, but there will always be flaws
  • 03:00 – Marketing School is giving away a free 1 year subscription of Crazy Egg which is a visual analytics tool
  • 03:59 – That’s it for today’s episode!

3 Key Points:

  1. There are several ways to calculate customer lifetime value, just find the one that suits you and your needs best.
  2. Consider using a tool for a more accurate calculation of lifetime value.
  3. You can create and execute the formula yourself, but don’t expect it to be error-free.

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