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Your All-In-One Guide to Customer Lifetime Value


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No matter what industry you’re in, there’s no denying that your customers play a big role in your brand’s success. Since they’re essentially the lifeblood of your business, you should double down on customer loyalty and do everything in your power to keep them happy.

If you’re consistently able to satisfy your clients, your brand will attain a strong base of loyal customers in no time.

Many benefits are linked to having a large volume of loyal customers. As your brand advocates, they’re more than willing to tell their peers about your services and are most likely to spend more on your brand in the long run.

Though companies ought to treat their customers equally, it becomes evident that not all clients have equal value and impact. Some occasionally buy, while others actively come back for a repeat transaction. As a growing business, having a better understanding of these dynamics is key to your growth and success.

What is Customer Lifetime Value and Why is It Important?

Recurring customers, regardless of how much they spend, will contribute significantly to any company over time. Maximizing the mileage of your clients is where the concept of Customer Lifetime Value (CLV) enters the equation.

CLV is a business’ revenue from a customer as an active buyer of its products or services. Awareness of CLVs and their importance helps firms gauge long-term relationships with clients instead of focusing on a single or a limited number of transactions. Listed below are some of the many reasons why you should measure CLVs.

  1. It allows businesses to track the impact of their marketing schemes and campaigns
    Measuring Customer Lifetime Values gives companies insights into how well their promotional strategies and tools, such as blogs and webinars, impact customer buying patterns and behavior . When tracked properly, businesses can adjust their approach to their clients, ensuring customer loyalty.  
  2. It improves decision-making of business operations for better customer relations

    Understanding your clients’ thoughts, needs, and preferences can help companies adjust accordingly and make better decisions in their operations to retain the existing clientele and potentially convert some into loyal customers. Knowing what makes your customers tick will make it easier for you to please them, whether in your sales or marketing efforts.  
  3. It helps business segment customers

    CLV can help you identify your brand’s occasional and repeat customers. Segmenting your customers based on how frequently they seek out your products and services allows your team to tailor-fit your marketing campaigns to focus more on the demographic that matters the most.

    Focusing on both short- and long-term clients will create a dynamic mix of marketing strategies and implementations meant to attract a larger array of customers to your brand.

  4. It aids businesses in predicting a customer's loyalty

    CLV allows you to have a glimpse of a customer’s lifespan with your business. . Since companies are able to track client satisfaction levels through CLVs, they can foresee which customers are most likely to be recurring buyers.

    Likewise, CLVs also show which subset of overall customers will likely be more inactive in the future, so companies can strategize and adjust accordingly.

  5. It reduces customer acquisition costs

    Customer acquisition is important for any business, but there’s no denying that it can be expensive. Fortunately, focusing on customer loyalty is a cost-friendly alternative.

    A continuously growing pool of loyal buyers can significantly reduce the cost of acquiring new customers. It’s great news since CLV can help you optimize your customer loyalty efforts through data-driven statistics and customer behavior patterns. CLV helps makes sure no initiative done by your company goes to waste. Additionally, you can reallocate the costs saved to improve other areas of your operations!

  6. It drives repeat purchases

Customers satisfied with your products and services are more likely to return and eventually become loyal customers to your brand. Likewise, happy customers will share their experiences to their family and friends, opening the door for more potential prospects. 

How to Calculate CLV: The Customer Lifetime Value Formula

As with any existing metric, the Customer Lifetime Value follows a specific formula. Each of the variables acts as a contributing factor to the eventual growth of your CLV. The formula is as follows:

CLV = Average Purchase Value x Purchase Frequency x Retention Period

  • Purchase Value is the average transaction size of the sale
  • Frequency is how often a buyer purchases a product or service in a week
  • Retention Period is the average time frame a customer stays with your brand

To apply this formula, pretend you own a coffee shop with products with an average sale value of PHP5. Customers who frequent the establishment visit thrice a week year-round for four years. It’s translated to:

CLV = PHP5 (average sale value) * 144 (annual visits) * 4 (retention period) = PHP 2,820

10 Ways to Improve Customer Lifetime Value

Now that the key importance of Customer Lifetime Value to any growing or existing business and how the formula is calculated are established, the next question is: how do you improve your business’s CLV?

  1. Create personalized offers

    Personalization is a key component in marketing since it can help you influence your customers’ purchasing behaviors. Having unique marketing campaigns from customer to customer is a great way to make your clients feel special. With this point in mind, personalize your offers according to customer behavior.
  2. Improve onboarding processes

    The onboarding process is a company’s first impression to a potential client and the one that makes the most difference. You can do it through guides, interactive how-to videos, wrapped tutorials, and similar content. To ensure that your onboarding process goes smoothly, ensure it’s easy and straightforward.
  3. Introduce a referral program

    Implementing a referral program or any similar initiatives can widen brand presence. Customers introduced to your brand through word-of-mouth and referrals can improve CLVs significantly.

    Satisfied clients refer their friends and families, which is already a testament to your business’s validity, reputation, and service. An example is the Rush Referral Program, where existing customers of the RUSH brand can refer their friends or someone they know in exchange for rewards in the form of subscription discounts!

  4. Feature your clients

    As a token of appreciation, companies should feature select clients and partners now and then, whether corporate partners or individual customers; promoting them on your company’s platforms encourages valuable and meaningful relationships.
  5. Provide outstanding customer service

    Take care of your customers, and they’ll take care of you in return. If a customer is having issues with your product, having a good customer service team will make all the difference in their experience. Addressing customer issues as quickly as possible is the best way to show them that you care.
  6. Create content to keep customers engaged

    Content marketing can greatly influence your customers to make a purchase. Since your clients may be in different sales funnel stages, you can create blogs or videos that discuss common pain points and how your products or services can help them!

    Aside from keeping your customers engaged, consistently blogging can also improve your website’s visibility on the search engine results pages (SERPs).

  7.  Opt for cross-selling and upselling strategies

    Cross-selling is the act of a business recommending a complementary product in addition to the one a buyer aims to purchase. Upselling, on the other hand, encourages consumers to spend more money for a slightly better product than the one they intend to purchase.

    Using both strategies helps increase overall customer experience since it makes them feel they’re getting their money’s worth. It can also increase the margin and purchase frequency, two of the factors found in the CLV formula.

  8.  Offer omnichannel support

    As with most businesses, exposure is necessary for any revenue income. Though traditional or offline exposure is equally important, having a  social media presence exposes companies to a wider pool of audiences, some of whom will be potential clients and lifetime customers.
  9.  Regularly collect feedback

    Treat your clients as valuable members of your company, and give them the option to provide feedback. Your loyal customers have the best insights to share since they’re the ones who transact with you the most. Listening to what they say won’t just drive repeat purchases but may also help you switch up your customer acquisition efforts.
  10. Implement loyalty programs

A well-made loyalty program can significantly drive customer retention and improve your overall revenue. Focusing on customer loyalty results in referrals and can help you save on customer acquisition costs. But if you’re planning to implement a loyalty program, make sure to have the right tools in your arsenal.

You’ll need a loyalty platform to help you manage your rewards program. The good news is that you don’t have to look elsewhere since Rush’s Loyalty Suite will give you everything you need to streamline your presence.   

Retain Your Most Valuable Customers

Whether your business is just starting or if you’ve already been operating for a few years, recognizing and understanding the impact of the Customer Lifetime Value will benefit you greatly.

Tracking this metric will give you valuable business insights into the strategies you’re working on and your most practical customers, among others. All this will help you improve the customer experience, enabling your brand to scale up quickly!  

With the points above in mind, it’ll be much easier for you to pinpoint your company’s best advocates! If your brand is planning to run a loyalty program, acquiring our Customer Loyalty Services will allow you to implement one seamlessly. Inquire today to learn more!

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