Calculating Lifetime Customer Value
From our friends at CleverTap
Key performance indicators can vary greatly between businesses. Some companies will actively focus on optimizing revenue per employee, while others give more attention to customer acquisition cost. One metric that should be acknowledged and understood by every company is customer lifetime value.
Customer lifetime value is the projected profit a company expects to earn from the average customer. This requires computing the average sale amount, the average number of sales, and the average duration a customer remains loyal. Multiplying these figures together with the profit margin results in the customer lifetime value.
Focusing on customer loyalty and retention will naturally lend itself to increase customer lifetime value. When you consider the cost to acquire a new customer far exceeds the cost to retain an existing customer, the benefits of optimizing customer lifetime value becomes evident. Our friends at CleverTap have put together the following visual guide to help optimize your customer lifetime value.