Understanding the financial metrics for customer lifetime valueThe full customer lifetime value calculator and the free Excel CLV template both provide a summary outcome for several related financial metrics. Please refer to the image below of the full CLV calculator. As you can see, at the bottom, there are multiple financial metrics listed, including:CLV (with […]
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The Leaky Bucket Theory or Analogy?The leaky bucket theory is more of an analogy than a theory. It is used because it is a nice and simple way of understanding the concept of customer relationship management and how to increase customer lifetime value.The theory uses a bucket that has several holes in the base and
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CLV and Customer Relationship Management (CRM)The customer lifetime value equation essentially views a customer as an income stream. So instead of considering the customer’s purchases as single transactions, the marketing focus becomes creating ongoing series of profitable transactions. These ongoing transactions are created through customer relationship management practices and strategies – with the success of
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Let’s look at the main CLV formula is two ways – the first way in words and then as a CLV equation (see separate article on another one of my websites). As you will see, the main customer lifetime value formula is an extension of the simple CLV formula. The main changes are that the
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There are two main approaches to calculating customer lifetime value.This article discusses the simple approach to calculating customer lifetime value – which is appropriate to use when customer profit contribution to each year are relatively flat. It is also a good idea to review the article on the full customer lifetime value formula, also available
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Why calculate customer lifetime value?Why has customer lifetime value – along with many other marketing metrics – becoming more important for marketers to use and understand? One of the key drivers is the shift from “art” to “science” in the marketing profession.For many years, marketing was essentially a creative process or a people relationship skill
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What is Customer lifetime value?Customer lifetime value is a measure of customer profitability over time. To help explain this concept, let’s start with a formal definition of customer lifetime value (CLV) from a well-regarded marketing metrics textbook. In the textbook Marketing Metrics: the definitive guide to measuring marketing performance (Farris et al 2010), the authors
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A segment profile is a descriptive summary of the size, needs, behaviors and preferences of consumers within a particular market segment, with the goal of evaluating segment attractiveness and developing suitable marketing strategies.
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Customer lifetime value is often called marketing’s golden metric. Certainly in most service industries, customer lifetime value would be a very important marketing metric.Customer lifetime value can be calculated quite simply at times, with a ballpark estimate. This may be appropriate for quick calculations and for general comments within a meeting, but is not suitable
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Brand personas are commonly used in customer journey mapping, but are generally helpful in most aspects of marketing strategy development. This is because a brand persona – which is a representation of the typical customer in a target market – helps the firm more clearly understand the consumer.Generally firms will develop multiple brand personas –
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