DEFINE YOUR GOALS FOR THE MODEL – WHAT ARE YOU TRYING TO PREDICT OR UNDERSTAND?
Having clearly defined goals is critical to developing a successful LTV predictive model. Modeling LTV provides marketers with invaluable insight into how much value each customer brings to their business. With this data, businesses can then make informed decisions about acquisition, pricing, and campaigns. For example, you could use pLTV to prioritize customers in the live chat queue.Perdict LTV modeling also allows stakeholders to understand costs associated with acquiring customers and retainment efforts, helping to optimize resources for maximum return on investment. A systematic approach to understanding LTV through modeling helps companies optimize operations for sustainable growth and success.
Building A PLTV Model In Google Sheets
Here’s an example of a very simple pLTV model that anyone can make in Google Sheets without any technical skills:
- Gather data on your customer’s purchase history, including the date of each purchase and the revenue associated with that purchase.
- Create a new sheet in Google Sheets and input the data from step 1 into the sheet.
- Create a column for the “customer lifetime” by using the formula =MAX(date of purchase)-MIN(date of purchase) for each customer.
- Create a “customer lifetime value” column using the formula =SUM(revenue) for each customer.
- Create a column for the “predicted lifetime value” using the formula =(customer lifetime value/customer lifetime)*average purchase frequency.
- Create a graph or chart to visualize each customer’s data and the predicted lifetime value.
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