Customer lifetime value (CLV)

How much is a client really worth for your business? How much does your customer spend? Who are the best customers, and how could you create brand loyalty to maximize repeat purchases? Those are crucial metrics to know. Calculating your customer lifetime value and improving the lifetime value of a customer for your brand can drastically impact your total revenue whilst optimizing your marketing budget.


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What is the customer lifetime value

Customer lifetime value (or CLV, CLTV, LTV) is the total worth of a customer over the period of time of their relationship with your business. It's an important metric as it costs less to keep existing customers than it does to acquire new ones, so increasing the value of your existing customers is a great way to drive growth. You can either improve the average order value, churn rate, or customer journey to help improve your customer lifetime value. Bottom line, you want to aim for those high-value customers.

How to calculate your customer lifetime value

Depending on if you're a SaaS, an ecommerce, a small business, a startup, or any other type of business model, the CLV calculation might not be as important. The customer lifetime value calculation is particularly useful if you have a subscription or sell products that have returning customers. For products like mattresses or wedding planning (the kind of things you only buy once or twice in your life), it might not be a very relevant metric to track.

The customer lifetime value formula:

CLV = customer value X average customer lifespan 

What is a good customer lifetime value?

For most businesses, your Customer Lifetime Value should be at least three times greater than your Customer Acquisition Cost (CAC). This way, you know that the amount of money you spend on growing your customer base but it's also a great way to get to know your most valuable customers and their demographics. 

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What is a bad customer lifetime value?

Calculating customer lifetime value is all about your own costs and profit margins. Overall, if getting a customer costs just as much (or more) than your customer lifetime value, it's not good and you might want to pump the breaks on those discount rates. Also, you want to measure your customer retention rates and customer churn rate as they go hand in hand with the CLV.

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Customer lifetime value examples & templates

Your CLV and all your customer data can be tracked in reports already filled with important metrics for your objectives. Here are some of them:

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Executive report template Executive report template

This dashboard template is filled with metrics your C-suite will want to see. Show them your revenue, new customers, churn rate, and more. You can also add some customer satisfaction KPIs, gross margin, or customer data to have a better overview.

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Google Analytics report template Google Analytics report template

Check the number of customers, traffic, customer journey through your website, and more with this easy-to-use GA template.

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Ecommerce report template Ecommerce report template

A report with all the most important metrics for your ecommerce site, like shopping cart abandonment, click-through rate, and revenue.

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Customer lifetime value best practices

Here are some of the best practices you should keep in mind to improve your customer lifetime value and customer retention.

Conversion rate best practices

step 1 icon Invest in customer experience

New customers coming to your business need to become loyal customers that will stay and keep buying for a longer time period. How do you achieve that? Well, by investing in customer support, listening to customer feedback, and also, with a good onboarding process. Offer a better customer experience that'll help your buyers stay longer and have a better view of your brand.

step 2 icon Create a loyalty program

Customer loyalty is crucial, but customer relationship is just one of the many ways you can improve it. By creating a loyalty program, you can drastically improve your retention rate, purchase frequency, and your average customer lifespan.

step 3 icon Consider cross-selling

Another great way to improve purchase frequency and customer profitability is by cross-selling and upselling. Your current customers probably need more than one product, or if you're a SaaS, maybe they need more features, so make sure to upsell/cross-sell them. You can use email automation for example to promote different products depending on your customer behavior or target different customer segments that might need other products. 

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Customer Lifetime Value Synonyms

Although customer lifetime value is widely used, there are multiple synonyms that can be used. Here are a few : 

CLV, Lifetime value (LTV), Client lifetime value (CLV), Account lifetime value, CLTV, Customer value, Lifetime customer value (LCV), Lifetime revenue (LTR)

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