In this article, I will show you how to calculate the LTV in a no-code way using only the Datrics platform.
But first - what is LTV, and why is it important? The customer life-time value (LTV) is a prognosis of the net profit that the customer brings to the company over the whole cycle of their relationship.
The main reason to calculate it is to balance the cost of client acquisition and the company's profit from the customer. Of course, the ideal scenario is when the acquisition cost is lower than LTV. Still, sometimes it is well worth investing in acquiring the new client and then developing relationships to increase the profit over time. It is also important to understand which factors impact LTV to make data-driven decisions.
Here we'll take the dataset
from an auto insurance company that contains the following information about the clients: the state, known historical LTV, type of coverage, education, gender, number of policies, the monthly premium, total claims amount, months since the last claim, vehicle class, and other columns.
The analytical pipeline in our case will look like this: