Introduction to Customer Lifetime Value (CLV)

Introduction to Customer Lifetime Value (CLV)

Customer lifetime value (CLV) measures the worth of a given customer to your store now and over their worth over the next 3 years. CLV measures how much, on average, each customer is worth to your store, now and in the future. It places a financial value on your customer relationships, i.e., the benefit of attracting new customers and keeping them.

Why CLV is important?

For retailers, it's one of the most critical measures of success. It's a customer-centric measure that can help you make important business decisions, and create marketing strategies to keep valuable customers and increase revenue from less valuable customers.

How CLV is calculated?

Your CLV is calculated using 3 important factors:

• average order value

• average order frequency (based on order data from the past year)

• orders from the past 3 years

🤖 CLV = Average order value x Average order frequency (the average number of orders per customer from the past year) x 3 years

The great news is that Marsello calculates this for you. In your Marsello admin, go to Analytics > Business performance, you'll see the CLV of your customer database.

Term definitions:

• Average Order Value: The average amount of money that the customer spends each time that they make an order. Average order value = Total sales ($) / Total order count.

• Average Order Frequency: The average number of repeat orders that a given customer makes. ​Order Frequency = Repeat order count / Total order count.

• 3 Years: The average overage order value x the average order frequency for three years. The customer lifetime value combines the value with a predictive element of 3 years as this is a prediction of how much each customer in your database is worth to your store now and over the next 3 years.

Improve CLV with Marsello

Here are a few ways in which Marsello's features can help improve your CLV:

Increase order value

• The Product Recommendation Block can be added to any of the email automations. This automatically pulls through products that your customers will most likely buy next.

• The Reward Your Best Customer Automation encourages your best customers to spend more by sending exclusive emails just for them.

Increase order frequency

• Loyalty Program: encourage customers to keep shopping with you by automatically rewarding loyalty points for spending, product reviews, sharing on social media, and more, that customers can use towards exclusive rewards.

• The Thank First-Time Customers Automation helps make a great first impression and bring first-time shoppers back a second time.

• The Win-Back Automation will help bring your customers back who haven’t shopped in a while.

Increase customer retention

• Feedback automatically asks customers to rate their experience to measure their satisfaction, helping improve your customers' experience so they keep shopping with you.

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