Have you been calculating CLTV wrong all this while?

As a Customer Experience strategist with over 15 years of experience, I have seen how the focus on Customer Life Time Value (CLTV) has grown over the years. While it is a great way to measure customer profitability, I believe we have been calculating CLTV wrong all this while.

Traditionally, CLTV is defined as the total revenue that a customer will bring to a company over their lifetime. The formula for calculating it is straightforward: multiply the average purchase value by the number of repeat transactions and the average customer lifespan. However, this formula simply gives us “Customer Life Time Revenue,” not necessarily the true value that customers derive from our products and services.

However, Value is what we as a business should be extending to the customer instead of measuring customers against. Ideally, CLTV should be defined as the value our products and services generate for customers. Products and services that save time, effort, and money generate tangible value, whereas experiences lead to memories and, in some cases, transformation. This evolution of value is invaluable, and it is the key to building a long-lasting relationship with customers.

The true value of our products and services lies in the impact they have on our customers' lives. If we can create something that improves their lives in a meaningful way, they will become loyal customers who are more likely to stick around for the long haul. And that is where the real value lies.

So, the next time you think about CLTV, I urge you to think about the value you bring to the table and the shelf life of the value you generate. How can you create products and services that not only generate revenue but also deliver real value to your customers? How can you build experiences that create memories and transformation for your customers? By focusing on these questions, we can start to shift the way we think about CLTV and begin to create truly valuable products and services that will keep customers coming back for more.

Would you agree if I said, it's time to rethink how we calculate CLTV. Instead of focusing on revenue, let's focus on the value we generate for our customers. By doing so, we can create products and services that truly make a difference in their lives, and build relationships that stand the test of time.

#CLTV #CustomerValue #CustomerExperience #CX #CustomerLoyalty #BusinessStrategy