Have you ever wondered how to calculate customer lifetime value? Or what it even is? Above all CLV, as it is often called, measures how much a customer is worth to your business over the course of their relationship with you.
Most importantly it considers all of the money a customer has spent with you and all of the future revenue you expect to earn from that customer. As a result knowing your customer lifetime value can help you make better decisions about when and how to invest in acquiring new customers.
In this video, part one of two, I’ll
- Firstly, look at why customer lifetime value is an important measure
- Secondly, go through the steps for calculating your own
- Finally,illustrate with different businesses.
Are you ready to calculate your customer lifetime value? Let’s get started!
What is customer lifetime value?
Making a profit is the goal of any business, and one key way to ensure profitability is to understand and calculate customer lifetime value. Certainly CLV is a metric that estimates how much revenue a company can expect to earn from an individual customer during the entire time they are associated with the company.
So how to calculate customer lifetime value? Watch to find out more
| Arts Cafe | Car dealership | Membership | |
|---|---|---|---|
| Average sale value | £10 | £35,000 | £30 |
| Annual transactions | 96 | 0.2 | 12 |
| Retention - years | 5 | 10 | 3 |
| Lifetime value | £4,800 | £70,000 | £1,080 |
| Average gross margin | £70% | 30% | 90% |
| Customer lifetime value | £3,360 | £21,000 | £972 |
Conclusion
To sum up customer lifetime value is a metric that you should be paying attention. Moreover pay attention if you want to make your business more successful. It takes into account all of the money a customer has ever spent with you, not just what they spend in any given transaction. So by using this metric, you can better understand which customers are worth investing in and how best to go about doing so. Listen to the rest of this broadcast to find out more about CLV and how you can use it for your own business’ success. Thanks for watching!
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