Acquiring new customers versus retaining existing ones. What is worth investing in and how much? That’s exactly what customer lifetime value will tell you. A metric that not only advises you on how to effectively allocate your marketing budget, but also how to increase your revenue . Discover how valuable different customers are to your business and read how to work with CLV.
What is CLV?
The abbreviation CLV comes from the combination overseas chinese in usa data of customer lifetime value or in Czech the lifetime value of the customer . This metric expresses the value of a customer who buys from you over the long term and repeatedly. CLV then calculates the expected revenue that this customer will bring you over the entire period of your business relationship.
How can CLV help you?
CLV is an important tool, especially in the e-commerce sector , where repeat purchases occur. It is the key to effectively setting the costs that you can invest in a customer so that it is always profitable for you. Generally speaking, lifetime value should be at least (ideally more) three chatbot: what is it and what is it used for in digital marketing? times the cost of acquiring a customer.
By calculating customer lifetime value, you can find answers to these and other questions:
- How much will a customer be willing to united states america data spend with us if they are satisfied?
- Which customer segment should we invest more in to generate higher sales?
- What kind of loyalty programs will work on our customers to retain them?
Calculate your CLV
To calculate you will need:
- Average purchase value = how much does a customer spend on average?
- Average purchase frequency = how many times a year does a customer purchase?
- Customer value = their average sales amount.
- Average customer lifespan = how long do they shop with you?
The CLV formula then looks like this:
CLV = (total value of customer purchases) × (customer lifetime) – (total cost of customer acquisition and service)
If you are not already collecting this data about your customers, we recommend starting. Ideally, you should use an all-in-one cloud-based system that will ensure that all your information is clearly organized and available at all times .