By Rafael Sotelo
Content manager at Marketing4eCommerce
ANDCustomer Lifetime Value is a metric that measures the economic value that a customer generates for a company throughout their relationship with it. In other words, CLV is the result of adding up the value of the revenue that the customer generates in each transaction, during a given period of time.
In an increasingly competitive business environment, companies are faced with the challenge of optimising their resources to increase their revenue and profitability. In this context, Customer Lifetime Value (CLV) has become a key tool for customer relationship management.
How to calculate Customer Lifetime Value
CLV Utilities
How to improve Customer Lifetime Value
How to calculate Customer Lifetime Value
The formula for calculating CLV is as follows:
CLV=(average customer purchase value x resale rate) x customer lifetime – customer acquisition costs
To show you one of the simplest ways brazil number data to calculate CLV, let's consider this example:
Value of the average purchase of a customer = €50
Resale rate = 3 purchases per year
Customer acquisition costs = €20
Number of customers at the beginning of the period (CI) = 100
Number of clients at a given endpoint (CF) = 150
Number of new customers acquired (NC) = 70
Time period = 1 year
The customer retention rate and customer lifetime duration with this data would be:
Customer retention rate = [(CF-CN) / CI] = [ (150-70) / 100] = 0.80, that is, we have 85% customer retention rate
Customer Lifetime Length = 1 / (1- Customer Retention Rate) = 1 / (1-0.80) = 5, i.e. customer life time is 5 years
Finally, the Customer Lifetime Value would be: (60€ x 5) x 6.6 – 20€ = 1,960€