Customer lifetime value or LTV is the amount of money a specific person will make over the entire period of using your service. However, it is unlikely that anyone will be able to predict how long a given person will buy your products or use your services. But this indicator is important for calculating investments in advertising and marketing.
Is it possible to predict LTV using outlook email list cohort studies? Absolutely! Here's how:
You define a cohort whose members made a payment in a specific month, for example, let it be January 2020.
See how long payments from this cohort continue.
For convenience, collect all the figures in a table and calculate the data for each month, for which you divide the entire amount of income received by the size of the group.
Finally, display the median of customers in different cohorts for previous periods to help you estimate your LTV forecast.
Comparison of customer acquisition channels
Cohort analysis helps to determine which sources bring in more valuable customers and to develop a further strategy in terms of investing money in advertising. Let's explain with an example:
the general cohort includes everyone who visited the online platform during a certain period of time;
the group is divided into segments depending on the attraction channel;
make a comparative analysis of retention and repeat order rates by month;
Depending on the coefficient, the most promising sources that supply loyal clients to you are identified.
The following formulas are used to calculate the coefficient:
Customer Retention Rate = (Number of Customers at End of Period - Number of Customers Acquired during Period) / Number of Customers at Start Date
Repeat Purchase Rate = Number of repeat purchasers / Total number of buyers
Advertising ROI Assessment
Of course, if the client, having just entered the website page, immediately made purchases, you and I would not know grief! However, this is not so. A person first studies the information, and then makes a decision to buy or postpone it for later. It happens that this period is too long, so it becomes difficult to evaluate the effectiveness of the advertising campaign. Or the conclusions are too hasty and incorrect. Using cohort analysis helps to evaluate the effectiveness of advertising:
A group of people who responded to one advertisement is identified.
The advertising channel efficiency indicator is calculated.
An analysis of the dynamics over several months is made.