What is Customer Lifetime Value?

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By choosing to measure certain metrics, an online store owner can provide themselves with a wealth of useful data to grow their business and understand customer behavior and market trends. One such metric is Customer Lifetime Value. It provides valuable insights that can pay off and benefit any business venture.

Customer Lifetime Value – index:
What is Customer Lifetime Value?
Why measure CLV?
How to calculate CLV?
How to increase customer lifetime value CLV?
What is Customer Lifetime Value?
Customer Lifetime Value (CLV), also known as Lifetime Value (LTV), defines the value that a company can obtain from a relationship with customers throughout their lifetime. Analyzing such parameters can outline how bolivia whatsapp number database revenue, on average, an entrepreneur will achieve thanks to the entire partnership with a customer. Comparing CLV with the cost of acquiring a customer will provide data to estimate the time needed to recover the investment that was made in acquiring a new customer.

Why measure CLV?
CLV also highlights the buyers with whom a company has a long-term relationship, so the entrepreneur knows which customer segment is most valuable . This way, he can better tailor his offers to them and develop his customer service department to increase consumer satisfaction.

Taking care of customers creates loyal and loyal customers. The entrepreneur does not need to spend budget on acquiring new and uncertain customers. In addition, these consumers are more likely to recommend the store to friends or write a positive review and return to the store's website to buy again.

Based on information about the profile of your most valuable customers and the length of time they have been with your company, you can better refine your target audience to attract genuine customers who resemble your regulars and who will also be interested in your product range.

How to calculate CLV?
To calculate CLV, you need two variables. First, average customer lifetime (ACL) is the average number of days between the first and last order for all your customers, measured in years. Convert the average number of days to years by dividing your number by 365. For example, if you determine that the ACL is 1,277.5 days, that would equate to an ACL of 3.5 years.

Next, average customer value (ACV) is the average amount of revenue a customer contributes to your business over a given period. It can be determined by multiplying average order size (AOS) by average order frequency (AOF). Once you have these two variables (ACL and ACV), you can calculate CLV.

For example:

What is Customer Lifetime Value - How to Calculate CLV
How to increase customer lifetime value CLV?
Taking care of an existing customer is more profitable for a company than investing money in acquiring new ones. The best ways to increase CLV are:

Increase average order value
AOV (Average Purchase Value) is the amount a customer spends on average in a store. It is calculated by dividing revenue by the number of orders.

Ways to increase AOV are:

offer free delivery,
cross-selling and upselling,
offer discounts/rebates,
implement a loyalty program.
Improve Average Purchase Frequency Rate (APFR)
This value indicates how many times a customer makes a transaction in a given period. APFR is calculated by dividing the number of purchases by the number of customers.

Ways to improve it:

offer discounts/discounts on subsequent purchases,
possibility of saving products in a wish list,
create advertising campaigns based on previous orders and customer interests,
divide customers into particular segments , for example by interests,
retargeting campaigns.
Extend the retention period, or customer life expectancy
This number determines how long a customer is loyal to a brand.

Ways to extend the retention period are:

loyalty programs,
building a community around the brand, for example on social media,
attract customers and increase their engagement , for example, through newsletters, Facebook posts.