Customer Lifecycle Value, What ?

Customer lifetime value (CLV) is a crucial metric for businesses as it helps them understand the value of their customers over their entire relationship with the company. CLV is the estimated amount of money that a customer will spend on a company's products or services during their entire relationship with that company.?

Consider Blockbuster v Netflix?/ sanity v Spotify?

Everything as a service. so it’s a subscription model not one off cost.?

need to deliver constant innovation, more services , content etc.?

CLV helps businesses to allocate their marketing budgets effectively, as they can focus on acquiring new customers who are likely to bring the most value over time. It is an important indicator of a business's long-term success and profitability.

There are different ways to measure customer lifetime value, but the most common formula is to calculate the average revenue per customer per year (ARPU) and multiply it by the number of years the customer is expected to remain with the company. This formula is often adjusted to account for other factors such as customer acquisition cost, retention rate, and discount rates. There are also more complex statistical models that can be used to predict CLV based on historical data and other factors.

Measuring CLV accurately requires a good understanding of the customer's behavior, preferences, and interactions with the company. This information can be obtained from various sources such as customer surveys, sales data, customer service interactions, and website analytics. By analyzing this data, businesses can identify the most valuable customers and tailor their marketing efforts and customer service to retain them and increase their lifetime value.

CLV can vary greatly depending on the industry, product, and customer segment. For example, a luxury car company may have a higher CLV than a fast-food chain, but the latter may have a higher number of customers and a lower customer acquisition cost. It is important to consider the context and compare CLV within the same industry and customer segment to get a meaningful benchmark.

In conclusion, customer lifetime value is a critical metric for businesses to understand the long-term value of their customers and allocate their resources accordingly. Measuring CLV requires a good understanding of the customer's behavior and preferences, and there are different ways to calculate it depending on the industry and business model. By focusing on increasing CLV, businesses can improve their profitability and build long-term customer relationships.

How can finance teams measure CLV? What’s useful software to assist?

Finance teams can measure customer lifetime value (CLV) by using different formulas and methods depending on the data they have available. Here are some ways that finance teams can measure CLV:

1. Simple CLV Formula: The basic formula to calculate CLV is to multiply the average revenue per customer by the customer's lifespan. For example, if the average revenue per customer is $100 and the customer's lifespan is 5 years, the CLV would be $500. This method is straightforward but doesn't take into account other factors that may influence customer behavior.

2. Historic CLV Formula: This method uses the customer's purchase history to predict future behavior. The formula takes into account the customer's past spending and the likelihood of them continuing to spend in the future. This method requires historical data to be accurate, and it assumes that the customer's behavior will remain consistent.

3. Predictive CLV Formula: Predictive analytics uses machine learning and data science to predict a customer's future behavior. This method uses data such as customer demographics, spending habits, and other factors to make predictions. This method is more accurate but requires more data and technical expertise.

To assist finance teams in measuring CLV, there are various software solutions available. Here are some useful software tools that can help:

1. Salesforce: Salesforce is a customer relationship management (CRM) software that can help finance teams manage customer data and create reports. It provides a 360-degree view of customers, enabling finance teams to track customer behavior, sales data, and other metrics that can be used to calculate CLV. But does it have enough ? In this highly integrated business world, can you really not be part of the #SAP network ?

2. Kissmetrics: Kissmetrics is a customer analytics platform that helps finance teams track customer behavior across multiple channels. It provides insights into customer interactions, which can help finance teams create targeted campaigns and improve customer engagement. But does it have enough ?

3. Mixpanel: Mixpanel is an analytics software that helps finance teams track user behavior in real-time. It provides insights into customer interactions with products or services, which can help finance teams identify opportunities for cross-selling or up-selling. But does it have enough ?

In conclusion, measuring CLV can help finance teams allocate resources effectively and make informed decisions about customer acquisition and retention. There are different formulas and methods to calculate CLV, depending on the data available. By using software tools such as Salesforce, Kissmetrics, and Mixpanel, finance teams can gain a deeper understanding of customer behavior and improve their CLV metrics.