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Lifetime Value Analysis

Most business to business marketers acquires new customer locations at a loss in anticipation of future orders that exceed this loss. Other marketers may acquire at varying levels of profit but the need to understand the initial order value against future revenue remains the same. Traditional response rate analysis and dollars-per-book data don’t consider future orders. Thus they frequently don’t lead to correct decisions.

LTV = AC + FV

This simple formula can be one of the most powerful drivers of profit for any direct marketing business. The trick is in its application. One number for all customers is better than not applying it at all but understanding how it impacts market segments/audiences and business time frame objectives, and applying it through marketing campaigns results in substantial improvement in ROI and business valuation.


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