What is Average Lifetime Revenue?
Average lifetime revenue (ALR) is a metric that measures the amount of revenue you can expect from any single customer for as long as that person remains a client. Understanding your store’s ALR empowers you to make well-informed marketing and sales decisions based on short- and long-term goals. Optimizing the expected value of any given customer over their average lifetime is key to your store’s success. One of the most direct methods of increasing your ALR is by ensuring a positive first impression. Any given customer is more likely to return to your store if their experience is rewarding. Addressing any friction and pain points that inhibit customer conversion will increase this rate. Follow the positive experience up with a retargeting campaign, and you can expect to see your ALR increase.
How to calculate Average Lifetime Revenue
Calculating ALR does not necessarily need to be complex, and the insight it gives is invaluable to your success. To find your ALR, you first need to know your average customer lifetime, your average cart value and average number of transactions. Once these metrics are known, multiplying them together gives you a paired down version of your ALR. Once you know your average lifetime revenue, using it in conjunction with other metrics like customer acquisition cost allows you to set goals and measure levels of success. Here’s ALR expressed as a formula: ALR = (Net Sales + Shipping Revenue + Tax) / Customers.