How To Calculate Lifetime Value in Drift | Arithmix
Learn how to calculate the lifetime value of your customers in Drift with our comprehensive guide. Discover the key metrics and formulas you need to know to optimize your customer acquisition and retention strategies.
Calculating lifetime value is an important part of any business strategy. It helps you understand the value of each customer over the course of their relationship with your company. In this article, we'll discuss what lifetime value is, when it's valuable to calculate, and how to calculate it using Drift.
What Is Lifetime Value?
Lifetime value is the total amount of revenue a customer generates for your business over the course of their relationship with you. This includes all purchases, subscriptions, and any other revenue streams associated with that customer. By calculating lifetime value, you can determine how much each customer is worth to your business and make informed decisions about how to allocate resources.
For example, if you run a subscription-based service, knowing the lifetime value of your customers can help you determine how much you can afford to spend on customer acquisition. If the lifetime value of a customer is $1,000, you might be willing to spend up to $500 to acquire that customer, knowing that you'll make a profit in the long run.
When Is It Valuable To Calculate Lifetime Value?
Calculating lifetime value is valuable in a variety of situations. Here are a few examples:
- When determining how much to spend on customer acquisition
- When deciding which customers to focus on for retention efforts
- When evaluating the success of marketing campaigns
- When making decisions about product pricing and packaging
By understanding the lifetime value of your customers, you can make more informed decisions about how to allocate resources and grow your business.
How to Calculate Lifetime Value Using Drift
Drift is a powerful tool for calculating lifetime value. Here's how to do it:
- Start by calculating the average purchase value. This is the average amount of money a customer spends per purchase.
- Next, calculate the average purchase frequency. This is the average number of purchases a customer makes over the course of their relationship with your business.
- Then, calculate the customer lifespan. This is the average length of time a customer stays with your business.
- Finally, multiply the average purchase value by the average purchase frequency, and then multiply that number by the customer lifespan. The result is the lifetime value of a customer.
For example, let's say the average purchase value is $50, the average purchase frequency is 4 times per year, and the customer lifespan is 3 years. The lifetime value of a customer would be calculated as follows:
$50 (average purchase value) x 4 (average purchase frequency) x 3 (customer lifespan) = $600
So the lifetime value of a customer in this example is $600.
Calculating lifetime value using Drift can help you make informed decisions about how to allocate resources and grow your business. By understanding the value of each customer, you can make strategic decisions that will help you achieve your business goals.
How Do You Calculate Lifetime Value in Drift
Drift 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 Drift 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 Drift, 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.
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 Drift 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 Drift 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.Use Arithmix free