How To Calculate Lifetime Value in Deltek Costpoint | Arithmix

Learn how to calculate the lifetime value of your customers using Deltek Costpoint with our step-by-step guide. Improve your business strategy and make informed decisions with this valuable metric.

Calculating lifetime value is an essential part of any business strategy. It helps you understand the value of a customer over the entire duration of their relationship with your company. By calculating lifetime value, you can determine how much revenue a customer will generate for your business, which can help you make informed decisions about marketing, sales, and customer retention. In this article, we will discuss what lifetime value is, when it is valuable to calculate, and how to calculate it.

What Is Lifetime Value?

Lifetime value is the total amount of revenue a customer will generate for your business over the entire duration of their relationship with your company. This includes all purchases, subscriptions, and any other revenue streams that the customer generates for your business. By calculating lifetime value, you can determine the long-term value of a customer to your business.

There are several factors that can impact lifetime value, including the frequency of purchases, the average order value, and the length of the customer relationship. By understanding these factors, you can identify opportunities to increase lifetime value and improve your overall business performance.

When Is It Valuable To Calculate Lifetime Value?

Calculating lifetime value is valuable for any business that wants to improve its marketing, sales, and customer retention strategies. By understanding the long-term value of a customer, you can make informed decisions about how much to invest in acquiring new customers, how to retain existing customers, and how to increase revenue from each customer.

Calculating lifetime value is particularly valuable for businesses that rely on recurring revenue streams, such as subscription-based businesses. By understanding the lifetime value of a customer, you can determine the optimal pricing strategy for your products or services, as well as identify opportunities to upsell or cross-sell to existing customers.

How to Calculate Lifetime Value

Calculating lifetime value involves several steps. First, you need to determine the average order value, which is the average amount of revenue generated by each customer transaction. Next, you need to determine the frequency of purchases, which is the average number of transactions per customer per year. Finally, you need to determine the length of the customer relationship, which is the average number of years that a customer remains active with your business.

Once you have these three pieces of information, you can calculate lifetime value using the following formula:

Lifetime Value = Average Order Value x Frequency of Purchases x Length of Customer Relationship

For example, if the average order value is $50, the frequency of purchases is 4 per year, and the length of the customer relationship is 5 years, the lifetime value would be:

Lifetime Value = $50 x 4 x 5 = $1,000

By calculating lifetime value, you can gain valuable insights into the long-term value of your customers and make informed decisions about how to improve your business performance. Whether you are a small business owner or a large corporation, understanding lifetime value is essential for success in today's competitive marketplace.

How Do You Calculate Lifetime Value in Deltek Costpoint

Deltek Costpoint itself isn’t naturally geared towards letting you calculate complex metrics like Lifetime Value. As an alternative, teams typically use products like Arithmix to import data from Deltek Costpoint and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Deltek Costpoint, combine it with data from other systems, and create calculations like Lifetime Value.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

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Calculating Lifetime Value in Arithmix

Calculating metrics like Lifetime Value is simple in Arithmix. Once you've created your free account, you’ll be able to import your Deltek Costpoint data, and use it to create natural language formulas for metrics like Lifetime Value.

Arithmix is designed to give you the power to build any calculations you want on top of your Deltek Costpoint data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.

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