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How To Calculate Customer Lifetime Value For Your Business

Choose Your Own CLV Adventure From Four Different Approaches

August 23rd, 2021
Brandon Purcell, VP, Principal Analyst
Brandon Purcell VP, Principal Analyst
Allison Snow, null
Allison Snow
With contributors:
Srividya Sridharan , Aldila Yunus , Diane Lynch

Summary

Customer lifetime value (CLV) is a crucial metric for companies because it allows them to predict the future profitability of their customers, yet firms struggle to calculate it. CLV is a journey, not a destination. Your first CLV model won’t be your last. Start with a minimum viable data approach, then add to it over time. The right equation for calculating CLV depends on the type of relationship you have with your customers and the predictability of future transactions. This report suggests a progressive approach to calculating CLV and introduces four industry-standard models to help customer insights pros get started.

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