Forecasting LTV1:30 with Michael Watson
Most LTV calculations are a forecast.
In an earlier video, we discussed how LTV is essentially a forecast 0:00 of the value a customer will bring us over their lifetime. 0:05 In the example we shared earlier, a customer that pays us $10 a month, 0:09 signing up today. 0:13 On a product that has average monthly gross turn of 20% will 0:15 have a $50 LTV before factoring in costs. 0:19 As with all forecasts or 0:23 predictions, sometimes things don't play out as expected. 0:25 Perhaps a new product enters the market, a recession hits, who knows? 0:29 Because we are projecting LTV for a customer we just acquired today. 0:34 Based on metrics derived from historical cohorts, 0:38 we need to monitor the metrics that are inputs to LTV. 0:41 How often we do this depends on A, 0:45 how sophisticated our business information and data systems are. 0:47 And B, how rapidly our business is changing. 0:51 Also, what if our customer lifetime is 36 months? 0:55 We are making customer acquisition cost goals based on an LTV 0:59 that pays back over a long period of time. 1:03 That could potentially be too long, depending on how much cash we have. 1:06 We'll soon introduce a measure of LTV that can help control for that. 1:10 But first, we need to introduce a specific type of chart or 1:15 report known as a cohort report. 1:19 If you already know what cohort reporting is, feel free to speed up the next video 1:22 or skip ahead directly to the video on realized LTV. 1:26
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