Understanding Customer Lifetime Value

Customer data is the name of the game. Now more than ever, it is crucial to understand the customer experience and anticipate their needs. Understanding your customers’ buying behavior and decisions and how they affect your team’s workflow is invaluable. Enter CLV, the metric that can streamline your workflow and help you to prioritize high-value customers.

What is CLV?

CLV, or Customer Lifetime Value, is the metric that estimates the value that a customer will bring to your business throughout the length of the relationship. Knowing this, your business can make informed decisions about what prospects to pursue, how to engage with current customers, and how to optimize your marketing strategy to reach your desired audiences.

What is LTV?

LTV, or Lifetime Value, is the metric that calculates the aggregate lifetime spend of your customers. CLV and LTV are crucial to understanding customer value and behavior before and after the first purchase.

Why does CLV matter?

CLV is crucial to understanding your customers and how they’ll evolve throughout your relationship. Being able to accurately calculate CLV means that you can predict a customer’s loyalty to your brand and their long-term value relative to the budget you’re spending to acquire and retain them.

If a customer has little loyalty to your business and is only likely to convert during big promotions or sales, it may not be worthwhile to your overall strategy to spend your budget trying to retain them. In comparison, a client with a strong relationship to your brand that makes regular purchases is much more valuable to your long-term health as a business. These are the types of clients you want to prioritize.

How to calculate CLV

Having a thorough understanding of your customers is crucial to the success of your business. Retina’s How to Calculate CLV whitepaper outlines the importance of CLV and how to calculate it. Retina’s approach to CLV goes beyond RFM and BTYD models by estimating customer-level behavioral patterns. This specific, customer-level data can be incorporated into your marketing, finance, and customer success strategies to help prioritize your customers from their first purchase. Contact us today to get started.