Customer lifetime value formula
what factors should you consider when calculating your lifetime value for the company?
One of the best ways to know which customers are the most valuable to a company is to use the Customer Lifetime Value (CLV) formula.
But luckily for us in marketing decision making, we can calculate customer lifetime value using a simplified version of the formula that is both simple and effective for marketing decision making.
example value proposition
Customer lifetime value (LTV) is one of the metrics that should be used by those companies that are growing because, by measuring LTV in relation to customer acquisition cost (CAC), they can determine how long it takes to recoup the investment it took to obtain a new customer, such as the cost of sales and marketing, for example.
Customer care and customer success teams can directly influence this during their journey. As such, the roles of customer service representatives and customer success managers are key to solving problems and providing recommendations that either incentivize customer loyalty to the company or lead to customer churn.
Customer lifetime value is a really important metric for any type of company. It is so after knowing that acquiring new customers is much more expensive than retaining existing ones, so extending LTV helps businesses to be much more sustainable; moreover, the results favor the creation of new and better customer retention strategies.
ltv approach
One of the best ways to know which customers are the most valuable to a company is to use the Customer Lifetime Value (CLV) formula.
But luckily for us in marketing decision making, we can calculate customer lifetime value using a simplified version of the formula that is both simple and effective for marketing decision making.
life time value of customer
The value of the customer is a key indicator for any company, since it allows us to make important decisions about sales, marketing strategies, products to promote and prioritize the type of service and attention to provide to consumers.
You must keep in mind that this type of classification by value is different from the market segmentation we do in marketing. Because it is done based on the purchases that a customer has made in your company.
It also allows you to create your ABC of most valuable customers by classifying them by profitability or revenue and thus help in the distribution of the sales team. For example, I assign the best salesperson in my company to the A types of customers with the highest value.
This metric is considered a key aspect for segmenting target customers and planning the best marketing strategies and customer value. So we recommend you to use it to know which is the ideal way to promote your customers according to the benefit they bring to your business.
