As a sales veteran, you are probably familiar with the concept of LTV (lifetime value) and its importance in determining the success of your acquisition strategies. But do you use predictive LTV in your day-to-day decision-making? If not, you’re missing out on a powerful tool that can give you a competitive advantage and an opportunity to drive the growth of your business.
Predictive LTV is a method of accurately estimating the future value of a customer, based on their historical behavior and other relevant data. Combining this forecast with traditional metrics such as CAC (customer acquisition cost) gives you a new dimension of knowledge that was previously inaccessible to you. This allows you to make more informed decisions that balance acquisition costs with your predicted ROI.
In a sense, not using predictive LTV to make informed decisions is like taking a walk, not knowing where it will end and how difficult it will be. You may have a general idea of where you’re going, but without sophisticated tools and technology, it’s easy to get lost, get sidetracked, or miss your destination altogether.
Identifying high-value customers early in their lifecycle is one of the biggest benefits of predictive LTV. You can use this to build more targeted, effective acquisition strategies that focus on acquiring and retaining customers. In addition, you can decide how much to invest in acquisition and retention efforts based on the predicted lifetime value of your customers.
CAC only optimization
CAC only optimization. Image Credits: Voyantis
CAC and predictive LTV optimization
CAC and predictive LTV optimization. Image Credits: Voyantis
Balance risk and growth with predictive LTV
Before we dive into the different approaches to predictive LTV, it’s important to understand the kinds of decisions predictive LTV can drive. Predictive LTV can play a vital role in shaping a company’s day-to-day decision-making. Here are some examples of how it can be included:
