The customer is king - but Customer Lifetime Value (CLV) analysis is the queen!

What is a Customer Lifetime Value (CLV) analysis? How do I calculate the Customer Lifetime Value? Is Customer Lifetime Value a KPI? Why should I conduct a CLV analysis? These and other questions are answered here.

Identify the most relevant customers directly and thus increase the company's profitability

For successful marketing, the value of an individual customer is an important indication of which relationships to pursue. The purpose of CLV is to assign a financial value to a customer. In doing so, customer lifetime value looks into the future and is an extremely helpful tool for decision-making and planning. As the trend is moving more and more towards a positive customer experience for existing customers, an analysis of customer value is of great importance for companies.  

Creation of customer value profiles

Mapping a clear profile of customer preferences and desires with a monetisation of customer value. As well as the identification of "good" and "bad" customers.

CLV as a cost control instrument

Definition and calculation of a customer value for better estimation of costs. CLV is thus an important tool for planning marketing expenditure.

Customer Retention & Acquisition

The CLV can be used to answer the following question: How much is an existing customer worth to me and how much is a new customer worth to me?

CLV & Customer Relationship

Calculating the CLV is the first step in optimising costs as well as a company's relationship with its customers. Customer relationships can be intensified in a selected manner.

 

Customer Lifetime Value - CLV
What is Customer Lifetime Value - simply explained

Customer Lifetime Value (CLV) - what is it?

The term CLV - customer value analysis in German - is composed of two metrics: the current and the potential customer value. The CLV thus describes a coverage amount that a person realises during his or her customer life.
 
Smart methods optimise the calculation of the CLV: Since many factors have to be estimated when calculating the CLV, smart methods or artificial intelligence are used to make the results more accurate and meaningful. Financial forecasts thus become more trustworthy and targeted marketing more effective.  
 

FAQs Customer Lifetime Value (CLV)

What is the aim of the CLV analysis?

The goal of a marketing strategy based on customer lifetime value is to build a long-term customer relationship through comprehensive customer care - because it is cheaper to keep existing customers than to acquire new ones.

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How is the CLV calculated?

Customer lifetime value can be calculated using various methods. These differ greatly in their complexity and content orientation. The calculation is carried out using algorithms from the field and machine learning/AI.
The following factors influence the calculation:  
  • - The cost of customer loyalty
  • - Temporary actions or contracts
  • - Offers or discounts for the customers
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What are the limits of CLV?

In principle, the more data - the better. With few data points, results can be fraught with great uncertainty.
 
As with customer segmentation , the three key data requirements also apply to CLV:
(1) Relevance: Does the dataset contain characteristics that are meaningful for customer segmentation?
(2) Quality: Are the data error-free and validated, are there missing entries?
(3) Quantity: Are there enough data series to cope with the complexity of the characteristics?
Your contact for the topic of Customer Lifetime Value (CLV)

"Refine the revenue of your business by being able to more precisely target customers who offer you added value - and identify early on those customers where extra effort would certainly not be worthwhile."

Dr Eric Trumm, Head of Data Science Workshop

Dr Eric Trumm Portrait
Dr. Eric Trumm
Head of data science and innovation

Video: Customer Lifetime Value: 4 things you need to know about CLV!

How much is an individual customer worth to me? How much does a new customer cost me compared to an existing customer? But what is CLV analysis anyway and what do I have to consider for a successful implementation?

Our video answers this and much more.

  1. Definition of Customer Lifetime Value (CLV)
  2. What are the concrete advantages of using CLV in my company?
  3. What are the different methods of CLV analysis? (existing vs new customers)
  4. How does the implementation process work?
The Customer Lifetime Value 4 things you need to know about CLV. Youtube Video with Stefan Lieder - Workshop Manager Data Science Studio
Play Video about The Customer Lifetime Value 4 things you need to know about CLV. Youtube Video with Stefan Lieder - Workshop Manager Data Science Studio

CLV & technology used

Analysis programme R with the client's preferred cloud programme:

  • Google Cloud Platform (GCP)
  • Amazon Web Services (AWS)
  • Azure

KNOWLEDGE

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IFURTHER INFORMATION

Further Customer Analytics & Reporting Solutions