Customer Lifetime Time Value

In today’s digital economy, customers are now more empowered than ever. They can easily switch services or providers anytime and for whatever reason.

It forces businesses to step up their game and operate with a different lens moving forward to avoid the risk of losing customers over trivial matters. After all, a high customer churn rate is unsustainable in the long term and directly impacts your business’s revenue and growth potential.

That being said, keeping customers happy while driving loyalty is no easy feat, and it requires a strategic approach that balances both short-term gains and long-term value.

This blog post explores seven effective tactics you can implement today to drive retention across your business.

Table of Contents

7 Tactics To Maximize Customer Lifetime Value And Grow By Retention 6

What is CLV?

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7 Tactics To Maximize Customer Lifetime Value And Grow By Retention 7

  • Customer Lifetime Value (CLV) is a way to calculate the profitability of a business based on its ability to retain existing customers.

Customer lifetime value (CLV), sometimes called customer retention rates, is a metric used to measure the financial performance of a business based on the average revenue it generates over the life of a single customer.

CLV helps businesses gauge how much clients are worth and what it takes to keep them pleased.

Businesses can use CLV to determine how much revenue they can generate from each customer throughout their entire relationship with the company. CLV informs businesses how much customers are worth and what it takes to keep them satisfied.

The concept of CLV originated from marketing research studies conducted by companies such as IBM, Procter & Gamble, and Microsoft. These studies found that 80% of the profit generated by a company came from 20% of its customers. This finding led to the creation of CLV.

The idea behind CLV is pretty straightforward: If you charge $100 per month for a product or service, and someone buys it every month for one year, your annual sales total $1,200. But what happens if that person stops buying your product or service? You lose out on future revenues.

So, if you want to know how profitable your business is, you need to look at the amount of money you make from each customer over their entire relationship with your brand.


Advantages of Customer Lifetime Value

  • Knowing your customer lifetime value helps you understand how well your marketing strategies perform.
  • Your customer lifetime value tells you what part of your business generates the most profit.
  • Retaining your customers is far better than attracting new ones.

Customer lifetime value (CLV) is one of the most important metrics businesses use today.

CLV metric lets you see whether your marketing efforts are working effectively and efficiently.

If you’re spending too much money on advertising, it could mean that your ad campaigns aren’t bringing in enough leads. Or perhaps you’re paying too much attention to low-quality leads.

Either way, you won’t be able to determine where you stand against your competitors accurately. In addition to helping you identify areas of improvement, knowing your CLV can help you predict future growth.

But, when you start measuring your performance using customer lifetime value, you’ll quickly discover which parts of your business are generating the most profit.

For instance, maybe you spend a lot of time and energy trying to attract new customers. Maybe you focus on acquiring high-value leads through lead generation programs.

But, to maximize your profitability, you must stop attracting new customers and start thinking about retaining them.

Why? Because while attracting new customers may bring in short-term profits, it doesn’t necessarily translate into long-term gains. After all, once you acquire a new customer, you still have to keep them happy. And, keeping customers happy isn’t easy.

That’s because, even though you might pay a premium for a customer who has already proven they are willing to buy from you again, there’s no guarantee that the person will continue buying from you.

On the contrary, some people prefer to stick with companies they trust. So, if you’re not careful, you could lose out on repeat business.

That’s why it makes sense to focus on retaining existing customers instead.

After all, if you retain your current customers, you’ll be able to generate higher levels of recurring revenue.


Challenges of Customer Lifetime Value

  • Calculating CLV is complicated because there are many variables involved.
  • A company’s CLV depends on its sales strategy.
  • Your CLV will change depending on whether or not you’re selling directly to consumers or through resellers.

The concept of customer lifetime value (CLV) is easy enough to grasp: multiply the average purchase price per customer over the length of the relationship.

However, calculating CLV is challenging because many factors include retention rates, churn, and product usage.

In other words, you need to consider the number of purchases made by each customer, the amount of money spent on each purchase, and the length of time the customer spends with your brand before making another purchase.

It is especially true for B2B companies. For example, if you sell software, you’d want to consider the number of licenses sold, the cost, and the length of the relationship between the customer and your brand.

This information helps you understand how much money you lose by letting customers leave your organization. It also gives you insight into how well your products perform.

Customer Lifetime Value Formula

  • The customer lifetime value formula helps companies understand how much money each customer brings them over time.

The key to understanding how CLV works lies in knowing how much you’ll earn per customer.

There are many ways (read more here) to calculate this number, but most rely on some variation of the following formula: Revenue / Number of Customers * Average Monthly Purchase Amount.


What are the tactics to increase customer lifetime value?

Sales Funnel And Conversion Rate
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Increasing customer lifetime value is a crucial component of the retail industry. In fact, according to Forrester Research, it is one of the most important factors determining whether a retailer succeeds or fails.

There are many ways to increase CLV. These include offering discounts, providing incentives, and improving customer experience. However, there are some specific tactics that companies should consider implementing.


Tactic one: Design a Great User Experience

  • A good UX makes buying easier and keeps customers coming back.
  • Designing a good UX starts with making sure the product works well.

A good UX makes buying easier, and it helps you to keep customers returning. But what does a good UX look like? Let’s take a closer look at some of the most important aspects of a good UX.

The first thing we do when designing a product is to make sure it works well. We think about how people use our products and what problems they might encounter while using them. It includes navigation, ease of finding information, and how intuitively someone can understand the features of our products.

We also consider the overall design of our products. How does the product feel? Is it visually appealing? Does it fit into the environment where it lives? And finally, we ask ourselves whether the product fits the customer’s needs. What problem does it solve? Are there better ways to solve that same problem? If we answer yes to those questions, we know we’ve done our job.


Tactic Two: Customize every step of the customer journey

  • Every stage of the buying cycle needs its marketing strategy

Marketing experts say it takes seven stages of the buying cycle to convert shoppers into buyers. Each stage represents a specific moment in the buying process, and marketers must tailor their messaging accordingly.

In fact, according to eMarketer, retailers are expected to spend $1.5 billion on customer acquisition strategies alone this year.

Customers who haven’t bought from your brand should receive separate emails from those who have. It is because customers who haven’t bought from a retailer before typically don’t know what products they want and aren’t ready to buy.

They’re still looking around, trying to figure out what they want. So, send them information about your product lines, prices, promotions, etc., but don’t make them feel like they’ve been sold to.

Instead, let them explore your site, learn about your brands, and find something they like.

The same goes for shoppers who haven’t purchased anything yet, and you shouldn’t bombard them with offers and discounts.

Give them plenty of options, but don’t push them toward purchasing. Let them browse your store and see what else is there.

Tactic Three: Be consistent along your channels

  • Customers expect a consistent experience across all channels.
  • Consistent communication between your team members will help them provide better services.
  • Ensure that your systems can handle large amounts of data.

There are many different ways customers interact with your brand today.

They may shop online, call you, walk into one of your stores, or even attend one of your events and one event.

Each channel requires a unique set of experiences and interactions.

To succeed in today’s digital world, providing a consistent customer service experience across all channels is important.

It includes everything from responding to online reviews to providing live chat support to answering questions via social media.

A consistent customer service experience leads directly to increased sales and profits.

In fact, according to Forrester Research, companies that rank highly in customer satisfaction scores see a 20% increase in revenues compared to those that don’t.

Provide a consistent experience across all platforms. Your employees must understand how each channel works and what information needs to be shared across channels.

You should also ensure that your systems can handle the volume of data generated across multiple channels.


Tactic Four: Make Repeat Purchases Easy

  • Retailers should focus on improving the overall customer experience.
  • Make sure there’s an easy way to pay for purchases

Retailers are losing sales because of poor customer experience. In fact, according to Forrester Research, nearly half of shoppers abandon online shopping carts due to problems like shipping costs, returns policies, and payment options.

It makes it hard for retailers to keep repeat buyers returning and returning for more.

Customers don’t mind paying a little extra for convenience.

A recent survey found that 77%of consumers prefer free returns over getting charged for returns. And 66% of those surveyed said they would rather shop online than go to a brick-and-mortar store.

So what does that mean for retailers? It means they must ensure that every process step is streamlined and easy for customers.


Tactic Five: Nurture relationships through postpurchase communications

  • Postpurchase communication strengthens the relationship between you and customers.
  • Send follow-ups to customers who bought from you recently.
  • Ask yourself what you want your customers to do after buying from you.

Postpurchase communication helps strengthen the relationship between you and your customers. It includes sending follow-up emails to remind customers of your brand, offering discounts and promotions, and providing useful information.

Customers like getting offers and coupons via email because they feel special and appreciated. They are less likely to buy again from a brand that doesn’t communicate with them regularly.

Automated emails work well for companies selling products or services over the web. You can send automated emails to customers based on their purchase history.

For example, if someone buys something from you every month, you could send them an email reminding them about your product.

Nurturing relationships starts before the sale. Before making a sale, ask yourself what you want your customer to do next. If you know what actions your customer wants to take, you’ll be able to you can tailor your marketing efforts accordingly.


Tactic Six: Reward Loyalty

  • Reward programs must offer something unique.
  • Rewards shouldn’t just be points or cash. They should be tangible items like gift cards or tickets.

Businesses are always looking for ways to incentivize consumers to spend money. One way to do this is through reward loyalty programs. These programs give customers rewards for spending money with the store.

However, many businesses fail to implement effective loyalty schemes. Here are two tips to help you avoid mistakes when implementing reward loyalty programs.

Offer Something Unique

A common mistake retailers make when creating a reward program is offering the same thing everyone else does.

It makes it difficult for consumers to differentiate themselves. If you want to stand out among competitors, consider offering something unique to your customer base.

Make Sure Your Rewards Are Tangible

Rewards aren’t worth much unless they’re tangible. Ensure your rewards should be something that has real value for them. Depending on your brand positioning, it can be saving money or exclusive invitation to events.


Tactic Seven: Enhance Personalization

  • Personalization is an important part of marketing today.
  • There are two main methods of providing a personalized experience: algorithmic and behavioural.
  • Combining these two methods creates a truly personalized experience.

The term personalization refers to the way businesses interact with customers. In simple terms, it involves tailoring experiences to fit specific needs. For example, you might look up a restaurant recommendation based on where you are located, how much money you have in your bank account, or whether you like spicy food.

Personalization isn’t just limited to online shopping. 

Personalization is all about creating a unique customer experience.

But there are many different ways to do this. One way is to use algorithms. Algorithms are computer programs designed to make decisions, and they determine what news stories to show you, what ads to display text, and what movies to recommend.

Another way to provide a personalized experience is to give people exactly what they want. When someone searches for something on Google or Amazon, the algorithm looks at previous purchases and preferences to suggest items they might enjoy.

Finally, you can combine both approaches. An algorithm might offer suggestions based on a person’s browsing history, while another program provides recommendations based on a person’s current location.

You can read more about how the technology will impact the retail space here.



  • CLV is an important metric that helps you understand how well your marketing efforts perform.
  • Knowing your CLV allows you to plan and figure out how many customers you need to acquire to reach certain goals.
  • Customer experience is key to increasing customer lifetime value.
  • Every step of the customer journey matters.
  • Consistent customer experience across all channels increases revenue.
  • Retaining your current customers increases your chances of making more money in the long run. If you’re looking for a way to increase your revenue, look no further than improving your customer experience.

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By PPonteco

A retail industry veteran with over 30 years of experience. I spent 10+ years in managerial positions in Southeast Asia and helped important companies establish their brand, enchaining the customer experience and expanding their business. I am excited to help other brands grow as he continues to learn and grow as a professional.

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