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SaaS Cost Analysis and Customer LTV Calculation

The document discusses calculating the costs savings and revenue lifting benefits of using a SaaS application like AnswerDash. It provides formulas for calculating customer lifetime value (CLV) based on factors like average monthly transactions, average order value, average customer lifespan, and average gross margin. Calculating CLV is important for companies to increase profits and e-commerce success by understanding the long-term value of customers.

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42 views2 pages

SaaS Cost Analysis and Customer LTV Calculation

The document discusses calculating the costs savings and revenue lifting benefits of using a SaaS application like AnswerDash. It provides formulas for calculating customer lifetime value (CLV) based on factors like average monthly transactions, average order value, average customer lifespan, and average gross margin. Calculating CLV is important for companies to increase profits and e-commerce success by understanding the long-term value of customers.

Uploaded by

Sounak
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Cost after use of Application of SaaS

Customer service cost                                                                $9,400

Selling costs                                                                              $8,800

Internet advertising cost                                                              $7,200

Total                                                                                          $25,400

Cost savings benefits are the benefits derived from the use of AnswerDash are the advantages
of using the service due to its ability to reduce costs for the organization. The cost benefit value
of AnswerDash to its users is the amount of cost that the service is able to save as compared to
when it was not being used for customer service.

Revenue lifting benefits are the benefits that accrue to an organization as a result of use of
increase in revenue due to use of a technology that did not exist before. The revenues that are
being accrued to the organization now is subtracted to the revenues that were being accrued
previously by the business.

Calculating Customer LTV

Customer LTV is important for a company to be able to plan and increase its profits to desirable
levels. The customer lifetime value is also important to overcome the overall e-commerce
success. The following is the formula for calculating customer lifelong.

CLV= ((T×AOV) AGM) ALT

Where:

T=Average monthly transactions

AOV= Average order value

ALT=Average Customer Lifespan (in months)

AGM+ Average gross margin

The overall formula then appears like: CLV=GML(R/ (1+D-R)

R=monthly retention rate


D=monthly discount rate

Therefore:

T=1,000,000

AOV=2,100

ALV=36 months

AGM=80%

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