Back

Most of the small business owners forget (or) don't care to calculate CLV. I recently had a call with my client who seems very frustrated with his marketing performance and sees marketing has money draining machine with no positive effects to company. I asked him 2 questions, what's your ROAS and CLV. He somewhat came with ROAS concept, But he had no clue what's the CLV (Customer lifetime Value) is?... I said, CLV plays a important role from planning your marketing budget to pricing of the product. He was shocked that he is not aware of this important concept. I teache'd him it's importance and how to calculate it. In this post, I will teach you the same and how you can also calculate it for the business. Save this post :) What is Customer Lifetime Value (CLV)? CLV stands for Customer Lifetime Value. It is the total revenue a business can expect to earn from a single customer over the entire time they interact with the business. Imagine you run a coffee shop. If a regular customer buys a ₹50 coffee from you every week and continues to visit for 5 years(Average estimation), the CLV would be: Average purchase value × Purchase frequency × Average customer lifespan ₹50 (per visit) x 52 weeks x 5 years = ₹13,000 This means this one customer will likely bring ₹13,000 in revenue over their "lifetime" as a customer. Easy right?, Ok now why is this important to calculate??, I will give you 3 solid points why you should - Guides Marketing Spending: If a customer has a CLV of ₹13,000, spending ₹2000 to acquire them makes sense, but spending ₹8000 does not. Improves Profitability: By focusing on high-value customers, businesses can prioritize those who bring in more revenue. Example: A subscription service may spend more effort retaining a customer who spends ₹500/month over one who spends ₹100/month. Shapes Retention Strategies: Understanding CLV helps justify investment in customer service and loyalty programs. Example: A restaurant offering free meals after 10 visits keeps high-value customers coming back. Before blaming the marketing as money gamble, Make sure first you done the marketing right ;) (From a marketing employees association😅) Hope this post helped!, Follow for more marketing stuffs!