Glossary

A repository of acronyms, jargon, and useful definitions perfect for eCommerce founders & marketers like yourself.

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Customer Lifetime Value

Customer Lifetime Value

The lifetime value of a customer represents the total amount of money a customer is expected to spend on your product or service during a lifetime. It helps you to figure out how much money to invest in getting new leads and retaining the existing customers.

Formula to calculate the customer lifetime value

Customer LTV= average dollar amount of a purchase X Number of customer purchases per year X Average length of the customer relationships in years

For example, a client who regularly buys jeans from your store might be worth:

$30 per pair of jeans X 3 pairs per year X 5 years= $450

Proven techniques to boost the lifetime value

  • In order to encourage repeat purchases, create a rewards program that is desirable.
  • Make your return and refund policies as easy as possible.
  • Do not delay the delivery of products as it leads to disappointment.
  • To build brand loyalty, offer freebies to the customers
  • Use upsell technique to increase the average value of customer transactions. For example, “Would you like to get a brush with this toothpaste?”
  • Stay in touch with your existing customers by sending them promotional offers every now and then.

Why is CLV important?

  • Strong brand image - When you target the right audience and your quality customers turn into loyal customers, that is when your brand strengthens and you get a high CLV.
  • It lets you grow - With a bigger margin, you can grow your business by developing new products or expanding overseas.
  • Customers love your brand - A high CLV shows that customers love your product and service. When customers love the quality and experience, they have high chances of returning back.
  • Better customer insight - Customer lifetime value gives you an insight into what customers feel about your brand so you can focus on improving the strategies and offers to serve them better.
free conversion rate optimization audit

The lifetime value of a customer represents the total amount of money a customer is expected to spend on your product or service during a lifetime. It helps you to figure out how much money to invest in getting new leads and retaining the existing customers.

Formula to calculate the customer lifetime value

Customer LTV= average dollar amount of a purchase X Number of customer purchases per year X Average length of the customer relationships in years

For example, a client who regularly buys jeans from your store might be worth:

$30 per pair of jeans X 3 pairs per year X 5 years= $450

Proven techniques to boost the lifetime value

  • In order to encourage repeat purchases, create a rewards program that is desirable.
  • Make your return and refund policies as easy as possible.
  • Do not delay the delivery of products as it leads to disappointment.
  • To build brand loyalty, offer freebies to the customers
  • Use upsell technique to increase the average value of customer transactions. For example, “Would you like to get a brush with this toothpaste?”
  • Stay in touch with your existing customers by sending them promotional offers every now and then.

Why is CLV important?

  • Strong brand image - When you target the right audience and your quality customers turn into loyal customers, that is when your brand strengthens and you get a high CLV.
  • It lets you grow - With a bigger margin, you can grow your business by developing new products or expanding overseas.
  • Customers love your brand - A high CLV shows that customers love your product and service. When customers love the quality and experience, they have high chances of returning back.
  • Better customer insight - Customer lifetime value gives you an insight into what customers feel about your brand so you can focus on improving the strategies and offers to serve them better.
free conversion rate optimization audit