What is Customer Lifetime Value (CLV)?

A prediction of the net profit attributed to the entire future relationship with a customer is the Customer Lifetime Value (CLV).

To determine LTV, multiply the average purchase value by the average number of sales in a customer’s lifetime by your company’s gross margin.

Customer Lifetime Value Example Definition

Customer Lifetime Value Wikipedia Definition

What is Customer Lifetime Value and how do you measure it in Google Analytics?

When measuring the Return On Investment, you get to know how well you are doing well as a web store. But is it possible to use your marketing budget even more effectively for the long haul? Yes, absolutely! Use the Customer Lifetime Value (CLV)!

CLV is the Key Performance Indicator that determines the value of a customer. With this, you will be able to determine how much you can spend to attract customers for the long run while taking into account repeat purchases of the customer.

This article describes the added value of CLV and how Google Analytics (GA) can be used to measure it. The deployment of GA described below also offers more analysis options for new and existing customers.

What is Customer Lifetime Value?

CLV is a calculation of the net revenue that a customer generates in the total period that they are your customer. This is the revenue that the customer has generated from the first to the last purchase.

Satisfied customers continue to buy at the same web store. They order again and therefore generate more revenue. The budget that was used to recruit these customers also generates revenue. This principle is based on the principles of CLV. Calculating CLV sets a guide value for the limit that can be spent to recruit a customer. This has made CLV indispensable for many companies in determining their marketing budget.

CLV is therefore the potential contribution of a customer to the profit your company makes in the period that this customer buys your products.

How do you calculate Customer Lifetime Value?

CLV is an expanded version of Return On Investment (ROI). ROI is calculated by dividing the costs by the revenue. CLV also takes into account the period that a customer is your customer. The period between the first and the last purchase can vary as well as depend on the type of product. For travelling, this period can be a year while for branded products, it can be many years.

If you want to calculate the ROI of your email marketing campaigns or the ROI of your popup service, you can do so via our tools.