How do you measure customer lifetime value in a partnership?

2 Why does partnership CLV matter?

Partnership CLV matters because it helps you evaluate the effectiveness and profitability of your partnership strategy. By measuring partnership CLV, you can compare it with your direct CLV (the profit you make from customers who buy from you directly) and your customer acquisition cost (CAC) through different channels. This way, you can determine if your partnerships are worth investing in, how to optimize them, and how to allocate your resources among them.

3 How to calculate partnership CLV?

Calculating partnership CLV can be done in various ways, depending on the data and assumptions available. The historical method requires detailed and reliable data, as it uses the actual revenue and costs that a customer has generated for your business through a partnership channel over a certain period. The predictive method is less accurate but more scalable and forward-looking, as it uses the expected revenue and costs that a customer will generate over their lifetime. Finally, the cohort method is useful for comparing different groups of customers and identifying trends and patterns, as it uses the average revenue and costs that a group of customers have generated for your business through a partnership channel over a certain period. Summing up the net profit from each transaction or interaction (historical method), multiplying the average net profit per customer by the average retention rate and lifespan (predictive method), or dividing the total net profit from the cohort by the number of customers (cohort method) are all effective ways to calculate partnership CLV.