How To Calculate LTV in DELMIAworks | Arithmix

If you're running a business, you've probably heard the term "LTV" thrown around. But what exactly is LTV, and why is it important to calculate it? In this article, we'll break down what LTV is, when it's valuable to calculate, and how you can calculate it in DELMIAworks.

What Is LTV?

LTV stands for "lifetime value," and it refers to the total amount of money a customer is expected to spend on your products or services over the course of their relationship with your business. Essentially, LTV is a way to measure the long-term profitability of a customer.

Calculating LTV involves taking into account a variety of factors, including the average purchase value, the frequency of purchases, and the length of the customer relationship. By understanding LTV, businesses can make more informed decisions about how much to invest in customer acquisition and retention.

When Is It Valuable To Calculate LTV?

Calculating LTV is valuable for any business that wants to maximize its profitability. By understanding the long-term value of a customer, businesses can make more informed decisions about how much to spend on marketing and customer acquisition.

For example, if you know that the average customer will spend $500 with your business over the course of their relationship, you might be willing to spend $100 to acquire that customer. However, if you know that the average customer will only spend $50, you might be less willing to spend as much on customer acquisition.

Additionally, understanding LTV can help businesses identify which customers are most valuable and which ones are not worth investing as much time and resources into. By focusing on high-LTV customers, businesses can maximize their profitability and ensure that they are getting the most out of their marketing and customer acquisition efforts.

How to Calculate LTV

Calculating LTV involves a bit of math, but it's not too complicated. Here's the basic formula:

LTV = (Average Purchase Value x Number of Purchases per Year x Average Customer Lifespan)

Let's break down each of these factors:

• Average Purchase Value: This is the average amount of money a customer spends on each purchase. To calculate this, simply divide your total revenue by the number of purchases.
• Number of Purchases per Year: This is the average number of purchases a customer makes per year. To calculate this, divide the total number of purchases by the number of customers.
• Average Customer Lifespan: This is the average length of time a customer stays with your business. To calculate this, simply take the total number of years a customer stays with your business and divide it by the number of customers.

Once you have these three factors, simply plug them into the formula and you'll have your LTV. For example, if your average purchase value is $50, the number of purchases per year is 2, and the average customer lifespan is 5 years, your LTV would be:

LTV = ($50 x 2 x 5) = $500

By understanding your LTV, you can make more informed decisions about how much to spend on customer acquisition and retention, and focus on the customers who are most valuable to your business.

How Do You Calculate LTV in DELMIAworks

DELMIAworks itself isn’t naturally geared towards letting you calculate complex metrics like LTV. As an alternative, teams typically use products like Arithmix to import data from DELMIAworks 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 DELMIAworks, combine it with data from other systems, and create calculations like LTV.

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 LTV in Arithmix

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

Arithmix is designed to give you the power to build any calculations you want on top of your DELMIAworks 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.