CLV or Customer Lifetime Value refers to the value of a customer to a business. This value isn't just measured through a purchase basis but rather across the entire consumer relationship. Acquiring new customers can be expensive, so looking at the increasing the consumer bonds you already have will be more cost-efficient and drive growth.
You can measure CLV in multiple ways. For instance, looking at touchpoints where consumers create value, integrating records to create a consumer journey, measuring revenue at each touchpoint, and adding all the revenue over the lifetime of the company. You can also look at the average order value, average transaction, and overall customer retention added together to determine CLV.
CLV is important to businesses because it can help justify and prioritize customer retention strategies. Look into your companies CLV and determine what is working well or what changes/improvements need to be made to have a better CLV.
How do you calculate CLV?
CLV can be calculated by multiplying the average purchase value by the number of purchases made over a certain period of time.
What are some benefits of tracking CLV?
Tracking CLV helps businesses identify their most valuable customers, understand customer behavior and spending patterns, and make more informed decisions about marketing strategies and budget allocations. Additionally, it can help businesses optimize pricing models and increase customer loyalty.
Fun Fact:
"The average CLV (Customer Lifetime Value) of customers in the retail industry is $1,000 per customer." (Pfeifer & Carraher, 2017).