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Benefits of LTV analysis

Knowing your customer LTV is important for several reasons.

Many of these items are similar to what is listed already on 108.20.10 Data Analysis - Optimize.

  • Tell you what an individual customer is worth
  • Allow you to estimate the value of your company’s overall customer equity

Segmentation opportunities with LTV? - Enable the company to divide customers into tangible segments (Related to Data Analysis - Segments - RFM), separating the most valuable and committed customers into different groups and distinguishing them from the less valuable but numerous others - Create opportunities to help you refine marketing practices and ensure the right approaches are being made to the right customers - Allow you to better predict how certain customers in certain situations might act going forward - Ensure that resources are used more efficiently in efforts to retain and develop existing customers and acquire new ones (1) > !!!! What is the difference between segmentation using RFM and segmentation using LTV? For RFM it makes sense because it can be a 2D plot. For LTV it would only be a sliding scale, and newer customers who might be better won’t have had enough time to build a high LTV

References: 1. https://s3.amazonaws.com/kw-wdp/epubs/20150912-WDP-Fader-CustomerCentricity_Chapter4_CourseraCustomerAnalytics001.pdf - Chapter 4, page 77