What is CLV and How to Calculate it?

CLV full form stands for Customer Lifetime Value and is a key stat for businesses to plan better strategies. Customer Lifetime Value (CLV) is a business metric that measures the total revenue a business may expect from a customer over a period of their relationship.

Customer Lifetime Value (CLV) becomes greater based on the time the customer continues to purchase from the company. It’s an important metric to evaluate as it costs more to acquire new customers than to keep the existing ones. Now, let us understand more about CLV and how you can calculate its value to improve your business tactics.

Customer Lifetime Value (CLV) is used to calculate the maximum amount of money a business can expect from a customer as long as they remain loyal. CLV helps you understand whether customers are satisfied with your company and if your marketing strategies are working.

This stat also shows if your business is heading in the right direction and is profitable in the long term or not. By determining what factors lead to customer satisfaction and loyalty, you can increase your CLV.

As you know, acquiring new clients requires a lot more work than keeping the existing ones. It includes grasping attention, creating interest, nurturing, and then finally closing a deal with them. Instead, if you focus on raising your CLV, you won’t need to continually invest a lot of time and money into your business.

Customer Lifetime Value (CLTV) = Customer Value X Average Customer Lifespan

where Customer Value= Average Purchase Value X Average Number of Purchases

For Example, A customer buys a new car every 4 years for $35,000. Supposedly, the customer is loyal to your brand and stays loyal for 20 years. Then, the CLV can be calculated as follows:

CLV = $35,000 (Avg sale) X 5 (Avg purchase) X 20 (years) = $35,00000

To calculate the profit for the same, you can subtract the amount that you have invested to acquire the customer from CLV.

Profit = Customer Lifetime Value (CLV) – Customer Acquisition Cost (CAC)

Establishing positive and long-lasting relationships with customers is the key to improving your CLV. Below, we have mentioned the best ways to boost your CLV figures and retain your customers for a long time.

Enhancing your clients’ experiences is the simplest method to keep them coming back for more. Customer experience not only includes what you have to offer but also store visits, queries, exposure to advertising, etc.

Improving the overall and each experience of customers with your brand can help you create long-term relationships. You must always strive to provide the finest experience to your clients and make them happy for choosing you.

Customers might engage with you on different platforms depending on their preferences. You must research and find out different channels which your customers prefer rather than assuming what they’ll use. Try to be available on every channel that your clients utilize and respond to their questions and problems ASAP.

According to research by Salesforce, “89% of customers are more likely to make another purchase after a positive customer experience.”

This shows that customer service plays a crucial role in customer satisfaction and retention. Therefore, you must try to offer quick and great customer service with multichannel support.

Social media is a fast and powerful way to connect with new prospects as well as existing clients. Nowadays, people already spend a lot of time on social media and it’s easy to get their attention there.

You can craft different content posts such as images, infographics, and impressive videos to attract your prospects’ interest. In addition, make an effort to be responsive to mentions, tags, and comments of your customers. This will aid in enhancing your social media customer experience and lead to higher CLV.

No other marketing strategy works better than word of mouth. An excellent way to retain customers is to reward them for returning and referring new clients. Loyalty programs help in keeping customers for a long time.

Your customers become your company’s advocate when they’re rewarded for purchasing again and referring others. You can increase the probability of customers returning by giving reward points, coupons, vouchers or special discounts, etc.

Considering client feedback can improve the customer experience. Your customers must feel valued and heard. By taking customer feedback, you can understand their expectations and areas of improvement. Whenever you get a bad customer review, you can always fix and resolve it. When you offer a solution or make up for the same, it leads to customer satisfaction.

Customer Lifetime Value or CLV is the total amount of money that a company can expect from the customer until they are loyal to them. It is a useful business metric that can help marketers to make informed and better decisions. You can determine your company’s profitability once you’ve broken down the various CLV components and Customer Acquisition Costs.

Your Customer Lifetime Value must be more than the Customer Acquisition Cost. You can increase your CLV by improving your customer experience, satisfaction, and by implementing loyalty programs.

If you are looking to increase your CLV and get more high-quality leads, reach us now at +1-732-481-9424 or email us at info@vsynergize.com. Our experts bring some of the most innovative and ROI-driven techniques to help strengthen your lead pipeline for the short and long term.