{"id":26311,"date":"2022-03-16T01:28:28","date_gmt":"2022-03-16T01:28:28","guid":{"rendered":"https:\/\/directiveconsulting.com\/uk\/?p=26311"},"modified":"2025-03-26T09:47:56","modified_gmt":"2025-03-26T13:47:56","slug":"calculating-lifetime-value-ltv","status":"publish","type":"post","link":"https:\/\/directiveconsulting.com\/uk\/blog\/calculating-lifetime-value-ltv\/","title":{"rendered":"Calculating Lifetime Value – Why It\u2019s Important and how To Do It"},"content":{"rendered":"

You\u2019ve probably heard of Lifetime Value (LTV) before. A lot of organizations talk about LTV and it\u2019s coming up a lot more often in discussions about marketing performance. So, what is it? And why is it so important these days?<\/span><\/p>\n

LTV is a measure of the amount of money an organization has spent with you throughout their tenure as a customer. It\u2019s that simple. Let\u2019s use a couple examples.<\/span><\/p>\n

Organization A has been a customer for 5 years and they have an annual recurring revenue (ARR) of $25,000.<\/span><\/p>\n

Organization B has been a customer for 3 years and they have an ARR of $50,000.<\/span><\/p>\n

Which organization has a higher LTV? Organization B does. They\u2019re LTV is $150,000, while Organization A has a LTV of $125,000.<\/span><\/p>\n

It\u2019s a fairly simple calculation\u2026 but it can be more difficult if clients can have different purchase options and contract lengths. The more different products and services you offer, with different types of contracts can complicate this a bit. But ultimately, it all boils down to answering one question\u2026 \u201cHow much money has Customer XYZ brought to your organization?\u201d<\/span><\/p>\n

 <\/p>\n

Why it\u2019s Important to Calculate<\/span><\/h2>\n

Once you\u2019re able to calculate LTV, it comes in super handy in a number of different situations.<\/span><\/p>\n

We at Directive use a formula called LTV to CAC to calculate the performance of a specific marketing channel. That\u2019s the LTV of a customer in relation to the cost to acquire that company. Using this metric, you can create a model that does a great job of measuring how profitable your marketing channels are.<\/span><\/p>\n

But it doesn\u2019t stop there. LTV can play a big role in helping identify your ideal customer profile (ICP) as well. You can use LTV to compare different industries or verticals to see which industry\/vertical has the best value to your organization. You can use LTV to compare geographies or regions. You can use LTV to compare account size\u2013by either revenue or number of employees.<\/span><\/p>\n

There\u2019s really no end to how you can use LTV to measure your organization\u2019s performance.<\/span><\/p>\n

 <\/p>\n

How to Calculate LTV in Salesforce<\/span><\/h2>\n

Now that you know what it is and how to use it, let\u2019s make sure you\u2019re able to calculate it in a way that gives you a ton of reporting and measurement flexibility. Let\u2019s get this calculated in Salesforce (SFDC). You can get this up and running in less than an hour.<\/span><\/p>\n

We want to get this calculation on the Account object. We do this because all Opportunities in SFDC are automatically to Accounts. So, the Account object is the ideal place to total up all of your Opps. We\u2019re going to use the below account as our test account. As you can see, this account has 3 Closed Won Opps, each with a different amount. We want a field on the Account object that totals up these Closed Won Opps, but excludes the Opp that\u2019s in the \u201cId. Decision Makers\u201d stage.<\/span><\/p>\n

\n

\"\"<\/p>\n

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We\u2019re going to go into the \u201cObject Manager\u201d section, which is in your \u201cSetup\u201d.<\/span><\/p>\n

\n

\"\"<\/p>\n

\n

In there, navigate to the Account object, and then click on \u201cFields & Relationships\u201d. Then, create a new field.<\/span><\/p>\n

Create the new field as \u201cRoll-Up Summary\u201d field type, then click \u201cNext\u201d.<\/span><\/p>\n

\n

\"\"<\/p>\n

\n

Name this field \u201cLifetime Value\u201d or something along those lines. Give it a description and add some help text to ensure that users know what this field is. Then click \u201cNext\u201d.<\/span><\/p>\n

Here, we want to set the \u201cSummarized Object\u201d to be the Opportunity object, so select \u201cOpportunities\u201d here. Next, select the \u201cRoll-Up Type\u201d to be \u201cSUM\u201d. And to the right of that, select the field you want to aggregate. Most of the time, this is going to be the \u201cAmount\u201d field, but you may use a custom field here that you want to aggregate instead. So, choose whichever field you want to aggregate.<\/span><\/p>\n

Lastly, on this same screen, we need to ensure that we\u2019re only pulling in Opportunities that are Closed Won. So, in the \u201cFilter Criteria\u201d section, select \u201cOnly records meeting certain criteria\u201d.<\/span><\/p>\n

That brings up a whole new section where we get to select our criteria. The field we want to select is the \u201cWon\u201d field. And we want that to equal \u201ctrue\u201d.<\/span><\/p>\n

\n

\"\"<\/p>\n

\n

To confirm that you have this set properly, it should look like the image below. The only difference may be the field that you selected to aggregate.<\/span><\/p>\n

\n

\"\"<\/p>\n

\n

If yours is ready to go, then click \u201cNext\u201d.<\/span><\/p>\n

This is where you\u2019re going to determine the field level security for this field. Make sure that it\u2019s visible to the Profiles that you want to be able to see this. Note that this field will be \u201cRead-Only\u201d for all Profiles. This is correct, as this field should not be editable. Once you\u2019re done selecting the Profiles, then click \u201cNext\u201d.<\/span><\/p>\n

Now, select the page layouts that you want this to be visible on. You definitely want this to be visible for both Sales and Marketing. And probably other views as well. Once you\u2019ve selected those, go ahead and click \u201cNext\u201d.<\/span><\/p>\n

You\u2019re done!! That\u2019s it\u2026 you\u2019ve created this field. Now, let\u2019s go look at Edge Communications (our test account) to see if it\u2019s working properly.<\/span><\/p>\n

\n

\"\"<\/p>\n

\n

Our new \u201cLifetime Value\u201d field shows a value of $185,000, which if we manually add up the value of the Closed Won Opps is correct.<\/span><\/p>\n

Awesome!!!<\/span><\/p>\n

 <\/p>\n

Let\u2019s See It In a Report<\/span><\/h2>\n

Okay, now that we have this field in place, and it looks like it\u2019s working properly, let\u2019s go see it in a report and see how we can use it.<\/span><\/p>\n

Go create a report using the \u201cAccounts\u201d Report Type. Let\u2019s make sure we select \u201cAll Accounts\u201d and then set the time parameter to be \u201cCreated Date\u201d and \u201cAll Time\u201d. Then, let\u2019s add another filter that the Lifetime Value field is greater than 0.<\/span><\/p>\n

Once you have that in place, go over to your \u201cOutline\u201d. Add in a row grouping for something like Industry. And, make sure you add your new \u201cLifetime Value” field in the \u201cColumns\u201d section. When you add that, click on the field in the left-hand navigation and check the \u201cSum\u201d and \u201cAverage\u201d boxes. It should look like the below image.<\/span><\/p>\n

\n

\"\"<\/p>\n

\n

Go ahead and click \u201cRun\u201d. You now have a report that shows you all Accounts that have a Lifetime Value, grouped by their Industry (or whichever field you selected), and show the total Lifetime Value for all Accounts in that Industry and the average Lifetime Value for all Accounts in that Industry.<\/span><\/p>\n

If you\u2019re satisfied with this report, create some new ones with new groupings for fields like \u201cLead Source\u201d, \u201cCountry\u201d, \u201cAnnual Revenue\u201d or \u201c# of Employees\u201d.<\/span><\/p>\n

Congratulations!! You\u2019re now doing LTV calculations right in SFDC!! And that wasn\u2019t painful at all.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

You\u2019ve probably heard of Lifetime Value (LTV) before. A lot of organizations talk about LTV and it\u2019s coming up a<\/p>\n","protected":false},"author":6,"featured_media":26312,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[24],"tags":[125,150,156],"class_list":["post-26311","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-agency-life","tag-ltv","tag-saas","tag-saas-marketing-operations"],"acf":[],"yoast_head":"\nCalculating Lifetime Value - 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