How to calculate customer lifetime value

Customer lifetime value is a useful number to have for a number of reasons. Not only does it help you to prioritize between different target groups. It also helps with gaining understanding about how your business is performing as it decreases or increases with specific target groups over time.

What is customer lifetime value?

CLV is the average value of a customer through their time with you, as a customer. To calculate this you need to know the average weekly spend per customer and the average customer lifespan (in years).

 

Why is CLV useful?

You can calculate CLV for different segments within your target audience. That way you know which customer segments within your target audience you should spend resources, efforts and time on. In short you can use CLV for the following;

  • Life time value – gives you insight on who our best customers are.
  • Merging this knowledge with audience insight helps you find the most profitable customers.
  • Helps you prioritize marketing spend, resources and other efforts accordingly.
  • A blue-print for using data to find look-a-likes to your most profitable customers
  • Helps with segmentation for your CRM database

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