Customer Lifetime Value

The actual commercial value of any customer is always determined by the aggregate of purchases made over their lifetime. An indicator like this presents the companies with an information-driven approach to acquiring and retaining customers based on their lifetime value.

Customer Lifetime Value (CLV or CLTV) is the critical metric in determining marketing strategies based on different categories of data obtained for each customer. Hence, CLV is a decision-making key indicator for companies for any upfront investment. When compared with customer acquisition/retention cost, customer lifetime value gives an actual profitability depiction. The envisaged strategies are then opted to get optimum results from the market.

Challenges Faced by the Customers

Non-contractual customers
Non-contractual customers are those who are not served regularly under any contractual obligation. Retention of such customers is constantly questioned, and they are not considered as lucrative as contractual customers. A predictive model is therefore required to map out the history of purchases of such customers to extrapolate future purchases. Customer Lifetime Value integrates this element to plan customer-targeted marketing campaigns.
Inefficient customer segmentation
Customer segmentation concerning demographics, transaction data, and marketing intelligence is a reasonable classification to determine clustered customer lifetime value. Improper and inefficient customer segmentation can lead to poor decision-driven outcomes. AI-mastered models for CLV classify customers into proper segments and resolve the part with the highest Customer Lifetime Value.
Low-value customers
Customer acquisition and retention costs for low-value customers should always be minimal. Associated low levels of ROI are the leading indicators in this case. Transactional data is observed to ensure maximum achievement of this goal, and the model is adapted to make lesser marketing campaigns towards such customers.
Dead Investments
Dead investments involve colossal initial funds engagement with the most negligible probability of return. The reason is zero customer lifetime value, which can lead to disastrous circumstances if not realized. CLV metric can be critical for these cases to determine the long-term ROI potential of the customers. Once established that CLV could be almost negligible with advanced diagnostic techniques, dead investments can be avoided.

In a nutshell:

Customer lifetime value supports adequate upfront investments, optimal futuristic decisions, and quality control compliance with a company’s code of conduct for each customer individually.