Customer Lifetime Value

02 Apr Customer Lifetime Value

Chetan Patel

Customer Lifetime Value

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CLV = average value of a purchase X number of times the customer will buy each year X average length of the customer relationship (in years)

So a marathon runner who regularly buys shoes from your shoe store might be worth:

$100 per pair of shoes X 4 pairs per year X 8 years = $100x4x8=$3,200

And the mom of a toddler might be worth:

$20 per pair X 5 pairs per year X 3 years = $20x5x3 = $300

So who should you be paying more attention to? Clearly, the adult runners in your database.