A beginner’s guide to lifetime value

Customer lifetime value (CLV or CLTV) is an indicator of a customer’s lifetime value, taking into account the length of that customership, and relating it to the average lifetime value of all customers.

In retail, customer lifetime value is an ongoing figure, since there isn’t necessarily a real end date for a customer – except by death or GDRP. The lifetime value of every customer can be re-calculated with the occurrence of every single new sale.

Customer lifetime value on Custobar

Customer lifetime value

Customer lifetime value, as calculated and provided to you by Custobar, is a figure evaluating the a customer’s “worth” to you, and is arrived at using the following formula:

"((total sales of the customer / ((now - first active date in months)) / 100) * (profit margin) * (average lifetime for customers in months)"

…where profit margin is a company definable value, with the default set at 0.05. The customers’ average lifetime is calculated from their first and last active dates. These lifetime values are updated once a day.

Great. So how is the customer lifetime value useful to me?

The lifetime value figure allows you to compare your customers over time. It’s an easy way to see how valuable an individual customer or customer segment is, relative to your customer base.

All of your data can be used for targeted messages in Custobar. Customer lifetime is no exception. The value is calculated as deciles, and is thereby easy to use as a segment for your campaign.