The two dimensions of customer satisfaction The customer’s assessment of their satisfaction following a purchase and consumption of a product involves a comparison of two views: What were their EXPECTATIONS of value prior to purchase? What was their perception of the value delivered AFTER purchase? The consumer will engage in Read full article…

Free online CLV calculator The following free online CLV calculator is ideal for quick calculations of customer lifetime value. If you need a more detailed calculation of customer lifetime value, please download the free Excel template for calculating customer lifetime value. How use the free online CLV calculator You only Read full article…

How to Use the Full CLV Calculator You only need to enter four numbers – please only type over the numbers in the white cells – the numbers in the orange cells are automatically calculated for you. To calculate the customer lifetime value, you will need to enter: Average customer Read full article…

There are five CLV videos available here: Using the free Excel CLV template (available for download on this site) A step-by-step guide to the CLV formula and calculation Using Excel to calculate CLV (without the above template) A guide to understanding discount rates An overview of financial metrics for marketing

What does a discount rate do? Discount rate converts future cash flows (that is revenue/profits) into today’s money for the firm. For example, if you put \$100 into a bank account today that have 10% interest, then in 12 months’ time you would have \$110 in the bank. In this Read full article…

Understanding the financial metrics for customer lifetime value The 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 Read full article…

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 Read full article…

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 Read full article…

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 Read full article…

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 Read full article…

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 Read full article…

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 Read full article…

Customer lifetime value has three main components: The acquisition cost of customer The annual profit of customer And the lifetime of the customer to the firm The average lifetime of a customer The final component in the customer lifetime value calculation is to work out the average length of Read full article…

Customer lifetime value has three main components: The acquisition cost of customer The annual profit of customer And the lifetime of the customer to the firm The annual profit of a customer The main component of the customer lifetime value formula is an understanding of what profitability is generated Read full article…

The calculation for customer lifetime value has three main components: The acquisition cost of customer The annual profit of customer And the lifetime of the customer to the firm Customer acquisition costs This is the amount of money it costs, on a per customer basis, to attract a first-time Read full article…

When considering the goal of trying to increase a customer’s lifetime value, one of the main levers is to attempt to increase loyalty/retention which will increase the length of time a customer remains a customer. In the customer lifetime value calculation, the customer’s lifetime in years is multiplied by Read full article…

A key aspect in the customer lifetime value (CLV) calculation is time spent as a customer – commonly referred to as the customer’s lifetime. When we refer to the customer’s lifetime in a marketing context, we are considering the average length of time a consumer is a customer of Read full article…