Customer Lifetime Value (CLV) has become a must know term for eCommerce merchants of any size. It allows you to discover the true value each customer has to your store. But what most people don't know are the different ways to calculate it and the true impact it has on your business. In this discussion we cover everything you need to know about customer lifetime value. We present a few ways to calculate it as well as show some cases where CLV can impact a business. These cases will show what happens when you ignore lifetime value, and the benefits of making decisions with CLV in mind.

1. Customer Lifetime Value
(CLV or LTV)

2. What Is Sweet Tooth?

3. Who Uses Sweet Tooth?
More than 4,000 retailers in over 40 countries.
Over 20 million happy, loyal customers
created.

4. Who Uses Sweet Tooth?
A few of our 4,000+ clients

5. CLV is a way to know how valuable a customer
is going to be to you over some period of time.
What is Customer Lifetime
Value?

6. Example of a store’s CLV:
Average customer is worth $197 over the next 2 years.
What is CLV?

7. Why Use CLV?
Takes the guessing out of:
SEM/PPC Advertising
Customer Retention Spending
Discounting, Promotions
and more…

8. Why doesn’t everybody use
CLV?
Less than 5% of online stores know their CLV

9. Why doesn’t everybody use
CLV?
It’s complicated & intimidating…

10. Rough CLV >> No CLV

11. Calculating CLV
Simple
Accurate Inexpensive

12. Calculating CLV
Simple
Accurate Inexpensive

13. Simple & Inexpensive CLV
CLV = AOV * APY * Profit Margin
AOV = Average Order Value
APY = Average Purchases per Year

14. Average Purchases per Year

15. Simple & Inexpensive CLV
CLV = AOV * APY * Profit Margin
Can be adjusted for any period of time

16. Calculating CLV
Simple
Accurate Inexpensive

17. Accurate & Inexpensive

18. More Accurate Models
Lifespan of a customer (t)
Discount Rate

19. Accurate & Inexpensive
Source: http://www.metricmogul.co.uk/tracking-customer-lifetime-value-in-google-analytics/

20. Accurate & Inexpensive
Resources:
https://rjmetrics.com/product/metrics/customer-lifetime-value
http://customerlifetimevalue.co/
http://www.metricmogul.co.uk/tracking-customer-lifetime-value-in-google-analytics/
https://blog.kissmetrics.com/how-to-calculate-lifetime-value
http://www.windsorcircle.com/blog/understanding-customer-lifetime-value-clv-clv-calculator
http://www.clv-calculator.com/customer-lifetime-value-formulas/clv-formula/example-customer-
lifetime-calculation/
http://www.slideshare.net/frippery/a-step-bystep-guide-to-calculating-customer-lifetime-value

21. Calculating CLV
Simple
Accurate Inexpensive

22. Simple & Accurate: Products/Apps

23. Calculating CLV
Aggregate vs Per Customer

24. What can you do with CLV?

25. Segment Your Customers
When you segment your customers you can
gain valuable insight into what customers are
the most profitable for you.
1. Acquisition Channel
2. Demographics

26. Acquisition Channel Segmentation
Segment CLV by customer acquisition channel
to determine how much to spend on each
channel

28. Demographic Segmentation
Segment CLV by demographics (e.g. location)
to determine what personas to write content
for.

30. Demographic Segmentation
• Product descriptions
• Blog posts
• Videos
• Branding
• Promotions

31. Use CLV to Measure Improvement
Set benchmarks. Know if CLV is improving!
If you are not tracking you won’t know if you
are improving.

32. Improve Your CLV
Improve your CLV by increasing:
1. Average Order Values
2. Purchase Frequency
3. Life Span

33. Improve Average Order Value
• Free shipping thresholds
• Cross selling
• Product bundles
• Points programs (additional point
thresholds)

34. Improve Purchase Frequency
• Add elements of gamification
• Email marketing (retention emails)
• Loyalty programs

35. Improve Customer Lifespan
• Provide amazing customer support
• Create an amazing customer experience

36. Advanced CLV Applications
• Cohort analysis
– A/B testing
– Marketing campaigns
• Integration with internal support systems
• Different CLV model comparisons & averaging
– Polynomial regression
– Bayesian inference
– Pareto/NBD
• Automated retention efforts

37. Do you calculate CLV? How?
What do you do with that
information?