From the course: CMO Foundations: Measuring Marketing Effectiveness (ROI)

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Measuring customer lifetime value (CLV)

Measuring customer lifetime value (CLV)

From the course: CMO Foundations: Measuring Marketing Effectiveness (ROI)

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Measuring customer lifetime value (CLV)

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- The most powerful customer metric out there is called customer lifetime value, or CLV for short. It's what that customer is worth to you in cash for the entire time they're with you as a customer expressed in today's dollars. Imagine a scenario where you're forced to make a choice between acquiring customer A or customer B. Which one would you choose? Well, it depends on how much they buy from you. If this customer spends more on your products than this customer, you know you'd select that one. But wait a minute. What if this customer A ends up costing you more in terms of selling and customer service? Now, she may spend more, but you actually earn less on her than on this customer. So then you would switch because the net profit is higher. But hold on, there's one more factor you have to consider. You make less profit on this customer A. But what have you expect to retain her for a longer period of time than you retain…

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