Forecasting LTV

Name: Forecasting LTV
Uploaded: 2018-12-19T06:52:01-05:00
Duration: 90 s
Description: Most LTV calculations are a forecast.

1:30 with Michael Watson

Most LTV calculations are a forecast.

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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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