What is the Customer Life Time Value?

So far we have mentioned how important it is to keep the customers, to work on their loyalty and to keep them actively buying. In the end, this leads to a lifetime value of the customer.

 

The customer lifetime value CLTV is calculated on the basis of the total level of sales (and payments) a customer did in a certain time slot, minus the marketing costs made in order to get the customer to buy from you.

 

It is also used to predict how much more profit a customer can deliver to a company. Depending on the level of sophistication this can be very complex. A very common practice to keep it simple and workable is to assume that the COGS (Costs of Goods Sold) will stay as is, as will the marketing costs and effectiveness.

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