Calculating Customer Lifetime Value (LTV) with Salesforce

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What is Customer Lifetime Value (LTV)??

LTV indicates the revenue a business has gained from a customer, in other words, the total revenue amount from all sales opportunities.

Sometimes LTV is defined as the predicted lifespan of the relationship with that customer too, but in this post I will only cover a simple LTV calculation.

Why is LTV Key for Marketers?

LTV is an important indicator that can influence your marketing segmentation and campaign messaging, as defining your target accounts, or form the basis for a customer loyalty campaign – what’s for certain, is that LTV can be used very effectively in Engagement Studio to influence your Pardot automated marketing campaigns.

This metric links in with the wider marketing qualified theme we have running through MQL May, and one that pushes us to think about marketing qualification beyond the customer’s first purchase.

Set up the LTV Field

All you need to do is create a custom field on the Account object in Salesforce. Here’s how:

Step 1: Select Field Type

Select field type ‘Roll-Up Summary’

 

Step 2: Name Your Field

Give the field a name that’s meaningful to your users and organisation. Adding a description and help text is optional, but I recommend it in order to avoid any confusion about what the value is referencing.

Step 3: Set The Calculation

You’re now on the page: ‘Define the summary calculation’.

  • The summarised object = Opportunities
  • Roll-up Type = SUM
  • Field to Aggregate = Amount
  • Filter criteria (make sure to select the ‘Only records meeting certain criteria…’ radio button). Luckily, Salesforce comes with a ‘Won’ field as standard, that is checked automatically if the opportunity changes to Closed Won. This one field makes setting our criteria straight-forward, like below:

Step 4: Add To Page Layouts

This is a useful metric to many people in your organisation, regardless of their role. I recommend adding this to your Salesforce Account pages. The result will look like this:

We’re only just getting started…

Reporting

Now, you can go and knock yourself out with reporting on this metric – opening up a whole new view on your marketable customer base. Using Salesforce reports and dashboards, you can leverage this field to show you interesting charts and graphs, such as:

  • Average Customer Lifetime Value
  • Lifetime Value by Industry
  • by Lead Source
  • by Account Size
  • Time since most valuable customers have purchased
  • Where most valuable customers are located
  • Which accounts have a high Pardot Grade (your model buyer profiles), but have a low LTV (yes, you have the power to turn that around with some targeted marketing!)

The list goes on – these are a handful of reports I have built for my clients in the past.

Summary

This post has shown you how easy it is to set up a customer lifetime value metric inside of Salesforce. With this field, marketers can defined target accounts, or run a customer loyalty campaign.

This metric links in with the wider marketing qualified theme we have running through MQL May, and one that pushes us to think about marketing qualification beyond the customer’s first purchase. For more posts featured in MQL May, visit this page.

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