Topic: E-Marketing

Quick & Easy Customer Lifetime Value Formula

Posted by alex94vides on 250 Points
Hello Marketers!
I've been tirelessly searching for a proven CLV calculator. All the formulas I come across give me different values or aren't clear enough in their directions to produce a reliable result. I'm trying to calculate CLV for a digital marketing agency. Can any of you, please share a proven & well explained CLV formula?
Thank you!
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  • Posted by mgoodman on Accepted
    There may not be a "proven CLV" because the world is dynamic and the CONCEPT of CLV is what's important, not some calculated value. Further, a formula that is "quick and easy" isn't likely to yield a reliable and repeatable result; the concept of CLV has many moveable parts, and the actual value is likely to change over time -- perhaps significantly.

    Competition, interest rates, prevailing industry rate-of-return, new management directions, promotion effectiveness, retention rate, corporate goals, market volatility, and dozens of other factors are all unknowns that must be taken into account. The actual result of a calculation today is probably not worth the time and effort the calculation will take.

    Make a few simple assumptions about how stable the world will be and go with that. (You'll be wrong, of course, but you can at least illustrate the concept.)
  • Posted by Gary Bloomer on Accepted
    Lots of key, keen, expert insight from Michael (as usual).

    What will you do with your findings? How will these data help you?
  • Posted by martinclave21 on Accepted
    Following steps to calculating customers lifetime value
    Step: 1 Average customer lifespan.
    Step: 2 Calculate the average purchase value
    Step: 3 Calculate the average frequency purchase rate
    Step: 4 Calculate the customer value
    Step: 5 Calculate the average customer lifespan
    Step: 6 Multiply the customer value and the average customer lifespan together.
    These steps are helpful to calculate Customer lifetime value in their life cycle with you.
  • Posted by Shelley Ryan on Moderator
    Hi Everyone,

    I am closing this question since there hasn't been much recent activity.

    Thanks for participating!


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