What is lifetime value?
The lifetime value, also known as Customer lifetime value (CLV), is the amount of money that customer spend with a certain company in the time of the money lifetime.
It is a metric that shows how much company spends on acquiring new clients through marketing campaigns, advertising, and promotional materials. So it is important for the company to calculate it. Simplistically, you have to deduct all expenses for a customer from a total number of actual revenues.
Frequently asked questions
How is customer lifetime value calculated?
Customer lifetime value (CLV) is generally calculated using some variant of the following formula: CLV = (average order value x average number of orders per customer) x average customer lifespan.
Why is customer lifetime value important?
Customer lifetime value is a key metric for businesses because it represents the total value that a customer will bring to a business over the course of their relationship. CLV is important because it can help businesses make decisions about customer acquisition, retention, and other strategic decisions.
How can I increase customer lifetime value?
Some common ways to increase customer lifetime value include developing strong customer relationships, providing excellent customer service, and offering high-quality products or services.
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