What is Customer Life-time value?
Customer Life-time Value (CLV) is a measure that calculates how valuable a customer is to a business or an organization. This is usually calculated for a period of span of 18 months or unlimited span of time. CLV is the total worth of a customer during the whole relationship period of the customer and the business.
Why is it necessary to calculate CLV?
It is important to know the CLV because it gives you the total worth of your customer. The higher the number, the greater the profit. This also equips you with reducing your customer acquisition costs and improves customer retention. Because if you know the true value of your customer, you may improve the retention rate.
How to calculate CLV?
CV = The average customer purchase value * average purchase frequency rate
CLV = CV * average customer lifespan
Need to predict CLV for your customers in your business or organization? Click here for a CLV template