Understanding and calculating customer lifetime value (CLV) for your brand

Customer lifetime value (CLV) is a key metric that every brand should understand and monitor. It tells you how much a customer is worth to your business over the entire period they are a customer. Find out more in our CLV explainer.

This article will explain what CLV is, how to calculate it, and how to use it to increase your business's profitability.

What is customer lifetime value?

Customer lifetime value (CLV) is the total net profit that your business makes from any given customer. It's a projection of the revenue that a customer relationship can bring to your company over the lifetime of that relationship.

How to calculate customer lifetime value

Here's a simple way to calculate CLV:

1. Calculate average purchase value: Divide your company's total revenue over a set period by the number of purchases during that same period.
2. Calculate average purchase frequency: Divide the number of purchases over a set period by the number of unique customers who made purchases during that period.
3. Calculate customer value: Multiply the average purchase value by the average purchase frequency.
4. Calculate average customer lifespan: Determine the average number of years a customer continues purchasing from your company.
5. Multiply customer value by the average customer lifespan. This gives you the CLV.

Formule to calculate customer lifetime value

The formula can be summarized as:

How to use CLV to increase profits

Understanding CLV can help your eCommerce brand in many ways:

• Focus on the right customers: Not all customers are equally profitable. By identifying those with high CLV, you can focus your marketing efforts on retaining these valuable customers.
• Improve customer retention: By tracking CLV, you can better understand how customer retention affects your bottom line and invest more in maintaining those relationships.
• Maximize return on investment (ROI): By focusing on customers with high CLV, you can increase your ROI on marketing campaigns.

Enhancing CLV with WhatsApp Business

An effective way to enhance CLV is through personalized communication with your customers. One platform that stands out for this is WhatsApp Business. Here's how you can use WhatsApp Business to improve your CLV:

• Improve communication: Establish a direct and personalized line of communication with your customers, fostering stronger relationships and improving customer satisfaction.
• Provide real-time support: Address customer queries promptly, providing a seamless and efficient customer experience.
• Run WhatsApp campaigns: Create targeted marketing campaigns using WhatsApp, allowing you to reach a wider audience and generate qualified leads.
• Automate customer journeys: Automate repetitive tasks using WhatsApp Business APIs, saving time and ensuring consistent messaging.

Check out here how to lower your CACs with WhatsApp business.

Your WhatsApp Business solution is charles

Understanding and optimizing customer lifetime value is crucial for any DTC eCommerce brand. By focusing on customers with high CLV and using tools like WhatsApp Business and charles, you can enhance customer relationships, lower customer acquisition cost and boost profitability.