Marketing - Corp. Communication

CLV – Customer Lifetime Value


Published on 04/30/2024 – Last Updated on 04/30/2024 by OTC

Knowing your Customer Lifetime Value (CLV) is decisive when it comes to determining the well-being of your business.

CLV gauges how much a customer may spend over their lifetime, allowing you to make informed decisions that will help grow your company and drive profits.

For example, consider a jewelry store. Let’s assume that Customer A invests $500 in the store every month over their lifetime — this computes to $6,000 of Customer Lifetime Value (CLV). By leveraging this data, the store owner can get a better understanding of Customer A’s spending patterns, uncover new marketing opportunities, and create more personalized campaigns.

What is Customer Lifetime Value (CLV)?

Customer Lifetime Value is a customer’s estimated monetary worth to your business throughout the duration of their relationship. This figure encompasses all anticipated earnings from any purchases your customers will make on products associated with you or directly through your company. Understanding this figure is essential for making informed decisions about how much capital to allocate for acquiring new customers and retaining current ones. Customer lifetime value provides you with invaluable insight into the loyalty of your current customers.

If they keep coming back for more, it is likely a clear indication that you’re doing something right in your business! Additionally, the higher your customer lifetime value is, the less money you will need to invest in acquiring new customers i.e. customer acquisition costs.

Why Is Customer Lifetime Value Important to Businesses?

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Customer Lifetime Value (CLV) FAQs

1) What are the three parts of customer lifetime value?
For calculating customer lifetime value, the following information is necessary:

      • Your customer’s average purchase
      • Your customer’s average rate of purchase
      • How long does a customer typically stay loyal to your brand

2) How much are your customers costing you?
CLV and CAC are two metrics that must go hand in hand. CAC stands for customer acquisition cost, which is the money you invest to bring a new user on board. This includes advertising campaigns, marketing efforts, special deals – anything! To obtain an accurate understanding of your customer lifetime value then it’s essential to take into account the total amount spent on acquiring customers too. Cost to Serve is an integral part of any business and encompasses all activities necessary for delivering the product or service to your customer. Logistical costs, overhead expenses in a physical setting, and contact center fees– are just some of the examples that form this equation.

3) What are the benefits of Customer Lifetime Value
Finding out customer lifetime value is vital for any prosperous business. It aids you in recognizing who are your most valuable customers, and those that will remain loyal to you over the years. Utilize the formulas and model we’ve covered to begin computing CLTV of your existing customer today to learn how your company measures up!


For More and moving ahead…
Talk to PHMC GPE Team !



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