Customer Lifetime Value (CLV or LTV)
Everything You Need to Know About Customer Lifetime Value (CLV)
Aug 05, 2015
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Customer Lifetime Value(CLV or LTV)
What Is Sweet Tooth?
Who Uses Sweet Tooth?
More than 4,000 retailers in over 40
countries.
Over 20 million happy, loyal customers
created.
Who Uses Sweet Tooth?
A few of our 4,000+ clients
CLV is a way to know how valuable a
customer is going to be to you over
some period of time.
What is Customer Lifetime Value?
Example of a store’s CLV:
Average customer is worth $197 over the next 2 years.
What is CLV?
Why Use CLV?
Takes the guessing out of:
SEM/PPC Advertising
Customer Retention Spending
Discounting, Promotions
and more…
Why doesn’t everybody use CLV?
Less than 5% of online stores know their
CLV
Why doesn’t everybody use CLV?
It’s complicated & intimidating…
Rough CLV >> No CLV
Calculating CLV
Simple
Accurate Inexpensive
Calculating CLV
Simple
Accurate Inexpensive
Simple & Inexpensive CLV
CLV = AOV * APY * Profit
Margin
AOV = Average Order Value
APY = Average Purchases per Year
Average Purchases per Year
Simple & Inexpensive CLV
CLV = AOV * APY * Profit
Margin
Can be adjusted for any period of time
Calculating CLV
Simple
Accurate Inexpensive
Accurate & Inexpensive
More Accurate Models
Lifespan of a customer (t)
Discount Rate
Accurate & Inexpensive
Source: http://www.metricmogul.co.uk/tracking-customer-lifetime-value-in-google-analytics/
Accurate & Inexpensive
Resources:https://rjmetrics.com/product/metrics/customer-lifetime-value
http://customerlifetimevalue.co/
http://www.metricmogul.co.uk/tracking-customer-lifetime-value-in-google-analytics/
https://blog.kissmetrics.com/how-to-calculate-lifetime-value
http://www.windsorcircle.com/blog/understanding-customer-lifetime-value-clv-clv-calculator
http://www.clv-calculator.com/customer-lifetime-value-formulas/clv-formula/example-customer-
lifetime-calculation
/
http://www.slideshare.net/frippery/a-step-bystep-guide-to-calculating-customer-lifetime-value
Calculating CLV
Simple
Accurate Inexpensive
Simple & Accurate: Products/Apps
Calculating CLV
Aggregate vs Per Customer
What can you do with CLV?
Segment Your Customers
When you segment your customers you
can gain valuable insight into what
customers are the most profitable for you.
1. Acquisition Channel
2. Demographics
Acquisition Channel Segmentation
Segment CLV by customer acquisition
channel to determine how much to spend
on each channel
Demographic Segmentation
Segment CLV by demographics (e.g.
location) to determine what personas to
write content for.
Demographic Segmentation
• Product descriptions
• Blog posts
• Videos
• Branding
• Promotions
Use CLV to Measure Improvement
Set benchmarks. Know if CLV is
improving!
If you are not tracking you won’t know if
you are improving.
Improve Your CLV
Improve your CLV by increasing:
1. Average Order Values
2. Purchase Frequency
3. Life Span
Improve Average Order Value
• Free shipping thresholds
• Cross selling
• Product bundles
• Points programs (additional point
thresholds)
Improve Purchase Frequency
• Add elements of gamification
• Email marketing (retention emails)
• Loyalty programs
Improve Customer Lifespan
• Provide amazing customer support
• Create an amazing customer
experience
Advanced CLV Applications
• Cohort analysis
– A/B testing
– Marketing campaigns
• Integration with internal support systems
• Different CLV model comparisons & averaging
– Polynomial regression
– Bayesian inference
– Pareto/NBD
• Automated retention efforts
Do you calculate CLV? How?
What do you do with that information?
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