All language subtitles for 22 - L1 18 Interpreting Lifetime Value V3 (1) - lang_en

One thing business analysts

sometimes rip up on are the assumptions they make about the data.

Let's go back to our WeCart company.

Say you're the business analysts,

calculating the LTV across the years,

and you're counting the number of transactions by converted customers during each year.

For example, you want to know the LTV for a customer acquired in 2016.

You want to include all the transactions the customer had even those in 2017.

LTV takes into account future uncertainty.

It is a good estimate about the future actions of the customer.

Another thing to keep in mind is the actual value of the product.

Most high value products,

such as a car or a house,

won't have customers coming back and buying it again and again.

For example, it's very likely you have bought cars from different dealerships.

So, for the dealership,

it is more important to focus on

the individual customer value rather than the lifetime value.

The value you provide each dealership is restricted to

that single purchase you made because you never visit them again.

Compare that to smaller orders at Amazon.

There, the lifetime value will make sense as

you're likely to come back and make orders several times.

Calculating lifetime value matters in this case.