Customer Lifetime Value Analysis
Calculate and optimize customer lifetime value. Learn how to increase CLV and improve customer profitability.
Understanding Customer Lifetime Value
CLV predicts the total revenue a customer will generate over their relationship with your business. It's essential for strategic decision-making.
Calculating CLV
Basic formula: Average Purchase Value × Purchase Frequency × Customer Lifespan
Advanced models incorporate retention rates, discount rates, and profit margins.
Why CLV Matters
Informs acquisition spending, guides retention investment, identifies valuable segments, and supports pricing decisions.
Improving CLV
Increase Purchase Frequency: Encourage repeat purchases through loyalty programs and email marketing.
Increase Average Order Value: Use upselling, cross-selling, and bundling.
Extend Customer Lifespan: Improve product quality, customer service, and engagement.
CLV Segmentation
Segment customers by CLV to prioritize high-value segments and tailor strategies.
CLV vs CAC
- Aim for 3:1 LTV:CAC ratio
- Monitor ratio trends
- Adjust acquisition strategy
- Balance growth and profitability