Calculating CLV: The Method

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Sustainable growth: Businesses today understand and use CLV better for long-term success. They focus on their customer’s lifetime value and not just short-term profits, which helps them create a sustainable business chain where they benefit from customer loyalty and long-term relationships.
Customer segmentation: Customer lifetime value helps you identify the different segments of the customer base according to their profitability. This helps businesses customise their marketing strategies, products, services, etc., according to the different needs of particular segments, which ultimately brings more profit.

CLV can be understood better by understanding the components philippines phone number list involved in it. The basic formula to calculate CLV is:

CLV = (customer value) x (customer lifespan in years)

CLV = (average purchase value x number of purchases per year) x (customer lifespan in years)

Let’s understand the components now:

The average purchase value is the average amount that a customer spends in a single transaction. To calculate this, you have to divide the total revenue by the number of times the customer has purchased over a period.
The number of purchases per year is how frequently a customer buys from your brand in a year. To calculate this, you must divide the total number of purchases by the number of customers.
A customer’s lifespan in years is the average time a customer continues buying from your brand or store. To calculate this, you must divide the sum of all customer lifespans by the number of customers.