Lifetime-value Analysis

LTV helps you determine how much you can afford to invest in a new buyer, looking beyond his or her initial purchase. For example, you can afford to invest in a new buyer as long as it’s less than the average lifetime profit per customer (including your buyer-acquisition cost). This assumes your cash flow is sufficient to handle that level of spending. You’re making a financial investment to acquire a new buyer in hopes of future payback. How long you can afford to wait for the payback depends on your financial situation and the payback opportunity. I think the payback should come within one year.