Customer Lifetime Value

What is customer lifetime value?

Customer Lifetime Value (CLV) is a metric that measures the total worth of a customer over the entire duration of their relationship with you. This metric helps you understand the long-term value of your customer base, guiding strategies for acquisition, retention, and growth.

Metric Overview

CLV estimates the total revenue you can expect from a single customer account, accounting for the revenue generated, the costs of acquiring and serving the customer, and the retention rate.

How to calculate customer lifetime value

To calculate CLV, use this formula:

CLV = (Average purchase value × Purchase frequency) × Customer lifespan 

If you want , consider adding factors such as gross margin, returns, and retention costs.

CLV Benchmarks

It can be hard to benchmark your customer lifetime value, because every industry, vertical, and audience is different. However, here are some general benchmarks to follow:

• Bad CLV: CLV is equal to or less than your customer acquisition cost (CAC).
• Good CLV: CLV is 2-3x higher than your CAC.
• Great CLV: CLV is more than 3x higher than your CAC.

Tips to increase your customer lifetime value

1. Improve your customer experience: A good customer experience with exceptional customer service and personalized content keep customers coming back.
2. Increase average order value: Use cross-selling and upselling strategies to encourage larger purchases.
3. Improve retention rates: Implement loyalty programs and engage customers with regular, relevant communication.
4. Improve your onsite marketing: Focus on high-value customer segments, behavioral segmentation, and tailor your marketing strategies to meet their needs.
5. Provide excellent customer support: Quick and efficient resolution of issues builds trust and encourages repeat business.

How to track customer lifetime value

• Triggerbee: Offers insights into customer behavior, helping you track and optimize CLV through personalized experiences and targeted campaigns.
• HubSpot: Provides comprehensive CRM and analytics tools to monitor customer interactions and calculate CLV.
• Google Analytics: Tracks customer activity and revenue, aiding in the calculation and analysis of CLV.
• Klaviyo: Integrates with ecommerce platforms to analyze purchase data and predict CLV.