LTR or Life Time Revenue refers to the amount of money that a customer spends on your product or service during their entire relationship with your company. It's important to measure LTR because it allows you to assess the profitability of acquiring new customers and the long-term value of your current customer base/customer loyalty.
There are a number of ways to calculate LTR, but the most common is to measure customer loyalty and how much revenue a business can generate from a single customer over the course of the relationship.
The formula for calculating LTR is:
LTR = (Average Revenue per Customer) x (Average Customer Lifetime)
There are a number of factors that can affect LTR, such as customer churn, which is the rate at which customers stop using your product or service. Other factors include customer acquisition costs (CAC), which is the amount of money spent to acquire new customers, and customer lifetime value (CLV), which is the average amount of time a customer remains with your company.
LTR is important to measure in your company as it allows you to assess the long-term value of your customer base and make decisions accordingly on where to allocate your resources. If you have a high LTR, it means that you're generating a lot of revenue from each customer and you can afford to spend more on acquiring new customers.
How is LTR calculated?
LTR is calculated by adding up all of the revenue generated from a customer's purchases over time.
Why is LTR important?
LTR is important because it helps businesses understand how much value they are getting from each customer and allows them to focus their marketing efforts on customers who are likely to generate more revenue in the long run.
Fun Fact:
"Lifetime revenue (LTR) is a metric that measures the total amount of money earned from a customer over their lifetime. According to research conducted by Salesforce, companies with strong LTR strategies generate 3-5 times more revenue than those without." (Salesforce, 2020)