Customer lifetime value is a measure of the total value a customer brings to a business over the course of their relationship.
Customer lifetime value (CLTV) is a metric used in product management to measure the total value of a customer over the course of their relationship with a company. It is calculated by multiplying the average purchase value by the number of purchases made over the customer’s lifetime. CLTV helps product managers understand how much revenue they can expect from each customer, and how much they should invest in acquiring and retaining them. It also helps them identify which customers are most valuable and prioritize their efforts accordingly. By understanding CLTV, product managers can make more informed decisions about pricing, marketing, and product development strategies that will maximize customer lifetime value.
Let's say a customer purchases a product from your store for $100. Over the course of the next year, they make 10 more purchases, each for $50. The customer's CLTV is then calculated as follows: CLTV = ($100 + (10 x $50)) / 12 months = $125 This means that the customer has a lifetime value of $125 over the course of 12 months. This can be used to help you understand how much you should be willing to spend on marketing and advertising to acquire this customer, as well as how much you should invest in providing them with excellent customer service and support.