How can you measure customer loyalty in computer repair using lifetime value?

1 What is LTV?

LTV is the present value of the future cash flows that a customer will provide to your business over their lifetime. It takes into account not only the initial purchase, but also the recurring revenue, the cross-selling and upselling opportunities, the referrals, and the costs of acquiring and retaining the customer. LTV can help you understand how much you can afford to invest in attracting and satisfying each customer, and how to prioritize your marketing and service efforts.

2 How to calculate LTV?

There are different ways to calculate LTV, depending on the data and assumptions you have. One simple formula is to multiply the average revenue per customer per year by the average customer lifespan in years, and then subtract the average cost per customer per year. For example, if you charge $100 per repair, and your customers need your service twice a year on average, and they stay with you for five years on average, and it costs you $50 per year to acquire and retain each customer, then your LTV is:

LTV = ($100 x 2 x 5) - ($50 x 5) = $500 - $250 = $250

This means that each customer is worth $250 to your business over their lifetime.

3 How to increase LTV?

There are two main ways to increase LTV: increase the revenue per customer, or increase the customer lifespan. You can increase the revenue per customer by offering additional services or products, such as maintenance plans, upgrades, accessories, or training. You can also increase the customer lifespan by providing excellent customer service, building trust and loyalty, rewarding repeat customers, and encouraging referrals. By increasing LTV, you can increase your profitability and competitiveness in the market.

4 How to segment customers by LTV?

Not all customers have the same LTV, and some may be more valuable than others. Therefore, it is useful to segment your customers by LTV, and tailor your marketing and service strategies accordingly. For example, you can use the Pareto principle, which states that 80% of your profit comes from 20% of your customers. You can identify your top 20% customers by LTV, and focus on retaining them, satisfying them, and creating advocates out of them. You can also identify your bottom 20% customers by LTV, and decide whether to invest more in them, or to let them go.

5 How to track LTV over time?

LTV is not a static metric, but a dynamic one that changes over time. Therefore, it is important to track LTV over time, and see how it is affected by your actions and external factors. You can use tools such as spreadsheets, dashboards, or software to monitor LTV trends and patterns, and to compare LTV across different customer segments, channels, or periods. By tracking LTV over time, you can measure the effectiveness of your customer loyalty and retention strategies, and identify areas for improvement.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?