Customer Lifetime Value, or CLV, is the total value a customer brings to a business over the lifespan, that is, the entire period of their relationship with the business.
It is calculated for a customer segment, and various calculation methods exist.
The simplest involves multiplying the Average Purchase Value by purchase frequency and Customer Lifespan. But it excludes customer acquisition costs.
Another method involves multiplying the Annual revenues per Customer by the Average lifespan and subtracting the Customer Acquisition Cost.&#160;&#160;
Consider a streaming service with two subscription plans: Plan A costs 7 dollars, Plan B costs 12 dollars, and the average customer lifespan is one and three years, respectively.
The company spends 100 dollars per customer acquisition.
Calculating CLVs reveals that customers on Plan B have a higher CLV than Plan A.
Additionally, Plan A operates at a loss unless supplemented with advertising revenues.
Such inputs enable the business to prioritize high-value customers and make informed decisions about marketing investments and customer acquisition costs, contributing to profitability.

customer lifetime value

Customer Lifetime Value (CLV) is a metric that quantifies the total revenue a business expects to earn from a customer throughout their entire relationship. It involves predicting the monetary value a customer will bring over time, factoring in their purchasing patterns, frequency, and duration of engagement.
CLV is crucial for businesses to assess the long-term profitability of acquiring and retaining customers. By understanding the value each customer contributes, companies can optimize marketing strategies, customer retention efforts, and overall business decisions. High CLV indicates a strong customer base, while low CLV may prompt companies to reassess their customer acquisition and retention strategies. Ultimately, focusing on maximizing CLV helps businesses enhance customer relationships and drive sustainable, long-term financial success.

Customer Lifetime Value

Customer Lifetime Value, or CLV, is the total value a customer brings to a business over the lifespan, that is, the entire period of their relationship ...

Business

JoVE Business

Marketing

Unit 1

Consumer Behaviour

KEY TERMS AND CONCEPTS

needs, wants, desires

Needs, Wants, Desires

A need is a basic requirement, essential for a person&#39;s physical and psychological well-being.
A want is an upgrade of a basic need influenced by a ...

consumer decision process

Consumer Decision Process

The consumer decision-making process typically involves five stages, including problem recognition, information search, evaluation of alternatives, ...

factors affecting consumer decision process - overview

factors-affecting-consumer-decision-process-overview

Factors Affecting Consumer Decision Process - Overview

Consumer decision-making is influenced by cultural, social, personal, psychological, marketing mix, and situational factors.
These factors alter a ...

factors affecting consumer decision process - cultural

factors-affecting-consumer-decision-process-cultural

Factors Affecting Consumer Decision Process - Cultural

Culture includes shared values, beliefs, customs, and practices learned from society, family, and social institutions.
These elements shape customers&#39; ...

examples of cultural factors influencing consumer behavior

examples-of-cultural-factors-influencing-consumer-behavior

Examples of cultural factors influencing consumer behavior

A country&#39;s culture, subcultures, and subclasses shape consumer needs and preferences.
And businesses must consider these cultural elements to stay ...

factors affecting consumer decision process - social

factors-affecting-consumer-decision-process-social

Factors Affecting Consumer Decision Process - Social

The social environment significantly influences consumers&#39; decision-making processes.
Reference groups that individuals identify with, like family or ...

factors affecting consumer decision process - personal

factors-affecting-consumer-decision-process-personal

Factors Affecting Consumer Decision Process - Personal

Several Personal factors influence consumer decisions.
First is the Age and Life Cycle Stage. A family with young children may prioritize safety features ...

factors affecting consumer decision process - psychological

factors-affecting-consumer-decision-process-psychological

Factors Affecting Consumer Decision Process - Psychological

Psychological factors refer to internal elements, conscious and unconscious, that influence how an individual thinks, feels, and acts.&#160;
Psychological ...

buying behavior

Buying Behavior

Consumer buying behavior is categorized into four types based on perceived brand differences and customer involvement levels.&#160;
Complex buying ...

buying behavior for a new product

Buying Behavior for a new product

Consumers encountering a new product exhibit different buying behaviors than when encountering a familiar one.
This difference arises from the ...

learning model

Learning Model

The Learning Model of Consumer Behavior emphasizes that learning can change consumer preferences, attitudes, and decision-making through experiences, ...

psychoanalytic model

Psychoanalytic Model

The psychoanalytic model of consumer behavior focuses on the impact of the unconscious mind on purchase decisions.
The model suggests that unconscious ...

sociological model

Sociological Model

The Sociological Model of consumer behavior seeks to explain consumer choices by examining social factors and influences.
&#160;It assumes consumers&#39; ...

economic model

Economic Model

The Economic Model of consumer behavior proposes that consumers seek maximum value by comparing prices and quality.
It assumes consumers have a fixed ...

engel-kollat-blackwell (ekb) model

Engel-Kollat-Blackwell (EKB) Model

The Engel Kollat Blackwell or EKB Model explains consumer behavior as a five-stage decision process.
The first stage is Problem Recognition. Troy realizes ...

black box model

Black Box Model

The Black Box Model, or the Stimulus-Response model, suggests that consumer decision-making is similar to a black box because a consumer&#39;s internal ...

hawkins stern impulse buying model

Hawkins Stern Impulse Buying Model

The Hawkins-Stern Impulse Buying Model states that spontaneous desires drive impulse buying rather than deliberate intentions.
The process unfolds when ...

howard sheth model

Howard Sheth Model

The Howard Sheth Model of Consumer Behavior suggests that consumers are inherently rational, making systematic decisions.
The model assumes customers view ...

howard sheth model - variables

Howard Sheth Model - Variables

The Howard-Sheth Model provides a framework for understanding consumer decision-making.
To illustrate it, let&#39;s consider Mike&#39;s decision-making ...

customer loyalty

Customer Loyalty

Customer loyalty is about establishing a lasting connection, where customers choose a particular product or brand repeatedly.
The loyal customers keep ...

gathering customer insights

Gathering Customer Insights

Customer insights empower businesses to make informed decisions, enabling them to understand and exceed customer expectations.
These valuable insights can ...

types of customers

Types of Customers

Customers can be categorized based on their behavior, preferences, and purchasing patterns.
New customers are first-time buyers, but their future loyalty ...

types of customer relationships

Types of Customer Relationships

Customer relationships, crucial for business success, are a spectrum from basic transactions to more collaborative interactions, as illustrated by the ...

key terms and concepts

51 Views. Customer Lifetime Value (CLV) is a metric that quantifies the total revenue a business expects to earn from a customer throughout their entire relationship. It involves predicting the monetary value a customer will bring over time, factoring in their purchasing patterns, frequency, and duration of engagement. CLV is crucial for businesses to assess the long-term profitability of acquiring and retaining customers. By understanding the value each customer contributes, companies can optim...

Video: Customer Lifetime Value - Concept

Video textbook for introductory marketing courses

marketing

Jove Business Marketing offers easy-to-understand animated lessons that explain how to use marketing principles in real situations. It explores the role of marketing in business and examines the marketing landscape and consumer purchasing behaviors. It also demonstrates methods to create, capture, deliver, and communicate customer value, all while emphasizing ethical practices in marketing.

3.21 : Customer Lifetime Value

3.21 : Customer Lifetime Value

3.1 : Needs, Wants, Desires

3.2 : Consumer Decision Process

3.3 : Factors Affecting Consumer Decision Process - Overview

3.4 : Factors Affecting Consumer Decision Process - Cultural

3.5 : Examples of cultural factors influencing consumer behavior

3.6 : Factors Affecting Consumer Decision Process - Social

3.7 : Factors Affecting Consumer Decision Process - Personal

3.8 : Factors Affecting Consumer Decision Process - Psychological

3.9 : Buying Behavior

3.10 : Buying Behavior for a new product

3.11 : Learning Model

3.12 : Psychoanalytic Model

3.13 : Sociological Model

3.14 : Economic Model