CLV – Customer Lifetime Value

Direct marketers often focus on Cost of Sale (CoS), compare that with the profits of a first sale, and decide whether to market to a segment customers or not based on a breakeven analysis.

However this approach does not factor into the equation future revenue streams from these customers.

If we knew how much a customer was likely to be worth in the future, we could make better informed decisions.

Some customers that would be loss-making on the first order (thanks to high acquisition, CoS or servicing costs) could be wildly profitable in future years.

Customer Lifetime Value or CLV helps us to calculate this future value. Metrics: Customer Lifetime Value (CLV, LCV or LTV)

The Question

How much is a customer worth?

Approach

Present value of expected future revenues from a customer

Commentary

Very useful for companies with contractual relationships such as telcos, banks, subscription service providers, monthly maintenance contract holders etc. Can be used to attribute profitable marketing and service costs.

The Formula

CLV = (Avg Annual Profit * Avg Years with Company)/(1 + Discount Rate%) ^ Avg Years with Company

Sales & Marketing

• Marketing Industry, Marketing Trade
• Sales Industry, Sales Trade
• The Sales Funnel

Marketing for Dummies Guides

• Marketing for Dummies
• Marketing Plan
• Marketing Strategy
• Positioning
• Differentiation
• Brand Equity
• Brand Marketing
• Direct Marketing
• RFM – Recency Frequency Monetary
• Breakeven Response Rate
• Customer Profitability
• CLV – Customer Lifetime Value
• Loyalty Program
• The 4 Ps
• The Campaign Framework
• The Marketing Budget
• The Marketing Mix

Measuring, Marketing, Metrics & KPIs

• KPI – The One Key Marketing Metric
• Marketing KPIs and Metrics
• Measuring Marketing
• ROMI – Return on Marketing Investment
• Marketing Finance
• Financial KPIs
• Market Share
• Mind Share
• Customer Satisfaction (Cust Sat)
• Net Promoter Score
• Kano Model

Online Marketing/ Digital Marketing

• CPM Advertising
• CPC Advertising
• CPA Advertising
• Click Through Rate (CTR or Click Thru Rate)
• Conversion Rate
• SEO Marketing
• SERP: Search Engine Ranking Page
• Behavioral Email
• Guerilla Marketing