What is the calculation method, meaning, and improvement method of LTV (Life Time Value)?

Hello, Fujii, I'm strong. LTV is explained in this article. Life Time Value。 Take the initial letter of each and say "LTV (El Tee Buoy)" or as it is, it is called lifetime value.

The word LTV. Entrepreneurs who have just started a business or businesses with unstable sales should keep this in mind as a top priority.

Understanding this LTV will help you stabilize your sales. It also increases sales steadily, which is directly linked to profits.

As I will explain later, LTV can be measured with simple calculations. It is a super simple formula that even a first-year junior high school student can calculate. How well is your business doing or is it dying? I'll have it calculated later.

LTV may be high or low, or you may have never measured it. If you are in business, please read this article to understand LTV.

LTV is like combat power. Think of it as representing the level of business with combat power.

Why is LTV important?

Before we talk about LTV first, lay the groundwork for the conversation. Where should we go? One of them is to win in the game of maximizing LTV.

I said earlier that LTV is the combat power of a business. As you know, business is war.

In this war, low combat power means death. I'm going to die.

In short, if your LTV continues to fall, you will eventually die.

Whether or not you can continue to succeed in business depends on how much effort you can put into improving the LTV number.

Definitely this is one key.

How I became aware of LTV

First, why am I talking about LTV? After graduating from university, I was a sole proprietor. At that time, I continued to work more than I do now.

I think that those who are doing business without individuals or employees will sympathize with me, if you don't work, you won't get money.

Therefore, I continued to work every day.

We secured a certain amount of income in this way, but what and how are businesses that make it easier to eat?

I was interested in thinking that I didn't know how to do it. So, I learned about the concept of LTV and became aware of it in earnest.

I learned LTV. Suddenly, the business grew rapidly,
I didn't have the luck of Miracle Fever like such an information product.

As a result of building the business based on the premise of LTV with a strong awareness of LTV, the business became loose and stable over the course of several months. This is how I feel about my LTV.

What is LTV (Life Time Value)?

Customer lifetime value. How much profit will one customer bring to him before he dies? This is the total amount.

First of all, I want you to calculate your current LTV. I will post the calculation formula in the comment section. Please try to do the calculation once. It is the same as blood pressure.

Measuring your current business status is essential to understand it in numbers rather than emotion-based.

There are multiple ways to calculate LTV. You can choose depending on the type of business, but I will post in the comments the main LTV calculation formulas that me, other managers, and business partners are doing.

Please calculate once.

How to calculate LTV [easy]

LTV = Close Rate × Cost per Contract

Now you can do the calculation. Example: If a 10,000 yen product has a 5% closing rate, the LTV is 500 yen.

There are various formulas, but please try using this simple formula first.

If you're looking for other formulas, look below.

• LTV = Sales ÷ Number of Customers
• LTV = Average Cost per Customer × Average Purchase Frequency × Average Duration

Here we will explain how to enhance your TV.

How to increase LTV

There are two easy ways.

• 1. Thorough business design
• Second, provide high-quality service

(1) Thorough business design

For example, if you sell a suspicious acupuncture point that is 1 million yen more expensive than a 100 yen chewing gum, your sales and profits will increase.

In other words, if you sell high-priced products rather than cheap products, sales will inevitably increase, and in this case, profits will remain.

Change the products you sell and the price. Or change the number of products you sell. By selling multiple back-end products, the total amount of profit is increased by pushing hard.

Or, to put it simply, introduce a business with a subscription model with regular payments like an online salon.

If it is 1,000 yen per month, if there are 10 members, it will be 10,000 yen per month and 120,000 yen per year. As long as the member does not stop, it will continue to be charged permanently, so the LTV will also increase.

Another option is to incorporate a mechanism to sell more and larger amounts of products, such as upselling or downselling.

To do this, you can appeal to high-priced products/services, or design online salons and common periodic payment rates.

Or they start to take measures such as selling a lot of things. That way, LTV will be improved without any flattery.

This is a way to intentionally include elements that increase LTV as a business design.

(2) Provide high-quality services

I said that I could sell products with high unit prices.

However, if you sell a expensive acupuncture point for 1 million yen, you will be flooded with complaints.

Or, even if you do an online salon that only scatters garbage-like information for 1980 yen per month, it is obvious that members will withdraw from the membership in the first month, saying, "This salon is garbage."

Or even if you make 5 or 6 backends that you don't want that are just damn expensive, no one will buy them.

Even if the business design is completed, if the content is, LTV will not increase.

Continue to provide products or services that far exceed the fees you receive. This is important.

If you are selling a high-priced product or service, carefully provide products that make you feel more than that.

If you want to run an online salon, you need to finish it at a level that will make you shout "Are you going to come this far?

I wrote about this idea of providing value in a separate article. Read also below.

>> The essence of business may not be "value provision"

Why is high-quality service important to increase LTV?

Even if it's a cool business, if the service is bad, the brand will fall.

I sent an email with an inquiry and received no reply even after 3 days, or when I called, I was suddenly hung up in 30 seconds because I was busy.

From order completion to product shipment, it is slow to slug.

No matter how cool a business is, customers accumulate hatred.

I want you to take care of the contents of the product and customer service like a demon.

Thoroughly implement these two approaches. That way, LTV will definitely go up. It's a plain story with no origin or children.

Businesses with LTV crawling are often flawed in either or both.

Summary: For those of you who want to increase LTV

So, when I sorted it out,LTV is customer lifetime value。 How much will you pay yourself until the customer dies? It is an expression that wraps it in an oblate.

What I want you to do after reading this article. It does calculate LTV. There are two approaches to low LTV.

• Thoroughly design your business
• Provide high-quality service

Review these two elements. This will definitely improve your LTV for your business. It's not a method that will change dramatically just by reviewing it, butIf you don't review it, the sustainability of your business may be jeopardized.

In short, reviewing LTV in your business is the first step in structuring your business strategically. A business without LTV is gambling. Such businesses have unstable sales, so you can see them right away. Let's start incorporating LTV into your business.

In web marketing, there is also the word CPA. I will explain this in another article.

See you soon. Thank you for reading to the end.