LTV Calculator

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					     Data Entry Area                                                           Lifetime Value Calculated Results. Do not enter any data here.
     Modify these figures to enter your data                                   This table will be computed automatically
     Table 1                                                                   Table 2
                              Acquisition Second           Third                                        Acquisition      Second       Third
Code         Variables           Year        Year          Year                       Variables            Year           Year        Year
A    Orders per year                   1.1        1.2           1.3            Retained Customers             200,000      121,200       86,537
B    Average Order Size               $90      $100          $120              Referred Customers               2,000        2,424        2,596
C    Retention Rate                 60.0%     70.0%         80.0%              Total Customers                202,000      123,624       89,133
D    Referral Rate                   1.0%       2.0%          3.0%             Retention Rate                     60%          70%          80%
E    Cost Percent                     60%        58%           57%             Referral Rate                     1.0%         2.0%         3.0%
F    Acquisition Cost Each            $32           0             0            Orders per year                     1.1          1.2          1.3
G    Marketing Cost Each               $3        $10           $10             Average Order Size                 $90        $100         $120
H    Special Program Cost              $2         $2            $2             Annual Revenue            $19,998,000 $14,834,880 $13,904,733
I    Database Cost                     $4         $4            $4
J    Referral Incentives              $15        $15           $15             Cost % of Revenue                  60%         58%               57%
K    Interest Rate                   6.0%       6.0%          6.0%             Product Costs              $11,998,800  $8,604,230        $7,925,698
L    Risk Factor                      1.60       1.60          1.60            Acquisition Cost            $6,400,000            0                 0
M    Days delay in payment              30         30            30            Marketing Cost                $606,000  $1,236,240          $891,329
N    Segment Size                 200,000         NA            NA             Special Program Cost           $404,000    $247,248          $178,266
                                                                               Database Cost                 $808,000    $494,496          $356,532
     If you have no data in a field, enter zero.                               Referral Incentives            $30,000     $36,360           $38,942
                                                                               Total Costs                $20,246,800 $10,618,574        $9,390,766
     For instructions click the link below:
                                                                            Net Revenue                     ($248,800) $4,216,306       $4,513,967
                                                                            Discount Rate                         1.01           1.10           1.21
                                                                            NPV Revenue                     ($246,933) $3,818,119       $3,729,625
                                                                            Cum NPV Revenue                 ($246,933) $3,571,186       $7,300,811
                                                                            Lifetime Value                     ($1.23)       $17.86          $36.50
     Using the Excel chart Table 1, modify the numbers shown with your own numbers. The resulting lifetime value of your customer segments will appear in Table 2.
     Notes:
     This table should be computed for a customer segment which has similar purchasing habits. It could be seniors, or teenagers, married with children, for example.

       A. B. Orders per year and average order size. Estimate these from existing records.
       C. Determine from your database how many newly acquired customers continue to make purchases in the second and third years after acquisition.
       D. If you have a program that encourages customers to refer others who become customers, put the percentage of successful referrals here.
       D. Estimate the cost of fulfilling the products or services. These are all inclusive costs: cost of goods sold, costs of delivery, sales commissions, etc.
       F. Acquisition cost: Add together your annual expenditures to acquire new customers by TV, Radio, Print, Direct Mail, Sales Visits and Bonuses, etc. and divide
       G. H. I. Estimate the costs per customer of your marketing to them
       J. If you compensate customers for referring customers who actually become customers, put the average amount paid out per successful referral.
       K. This is the market rate of interest used by your company to borrow money. If you do not borrow money, use the existing market rate of interest charged by ba
L. Risk factor: there is always risk in business. 1.0 = No Risk at All. 2.0 = There are serious risks from competition, obsolescence, declining market, terrorism, e
M. Consumers usually pay at the time of purchase. Business customers pay in 30, 60, 90, 120 days. Put your number in here.
N. Segment size. The LTV is the same for any size segment.
ments will appear in Table 2.

ed with children, for example. For business to business it could be SIC code groups with similar annual sales or numbers of employees.


after acquisition.

ommissions, etc.
and Bonuses, etc. and divide that total by the number of new customers actually acquired in the year.

cessful referral.
rate of interest charged by banks to business customers such as your company.
declining market, terrorism, etc.

				
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