Customer Lifetime Value or CLV – Examples and Techniques

A business can be grown in two ways:

1. By acquiring new customers.

2. By focusing on existing clients.

But – A business can grow substantially if you increase the clients lifetime value. (CLV)

Customer Lifetime Value

Customer Lifetime Value

Customer Lifetime Value or CLV shows you the profit you can make through one customer in a lifetime. In a customer experience program, Customer lifetime value (CLV) is one of the main factors that are monitored.

It measures quantitatively how a customer is valuable to a company within an unlimited period of time and not just during the first purchase. A rational cost per acquisition is acquired and understood by this metric.

The formula for measuring CLV

Customer revenue minus the costs of acquiring and serving the customer = CLV. A higher CLV refers to each customer bringing in higher revenue to your company.

Customer Lifetime Value – Examples

Apple

From a “power” iPhone user with its latest hardware, Apple can achieve a Customer Lifetime Value (CLV) of $2,400 in a span of 30 months. This happens through customers subscribing to the devices, new and existing Apple services. (Source: ounterpointresearch.com).

The services business for Apple gives people all the more reason and opportunity to stick with the products. It also helps the company diversify its revenue.

This maximises the customer lifetime value or (CLV).

 Starbucks

Did you know – The average customer lifetime value for Starbucks is $14,099.

Customer Lifetime Value – Techniques

1. Research & Customer Segmentation

Feedback channels, customer analysis and market research can help in learning more about your buyers. Segmenting buyers properly with the help of marketing automation software enables you to deliver targeted communications to your customers.

Example 1 – Amazon Personalize

Developers can build applications with the same machine learning technology as the one used by Amazon.com with the help of Amazon personalize. It provides real-time personalized recommendations for which no ML expertise is required.

Example 2 – Netflix customised Thumbnails

Netflix employs an algorithm with the task of sourcing high definition images from a show or film instead of using its original art as a thumbnail. Then it conducts more tests to figure out what gets more clicks by subscribers.

Customising thumbnails is just one of Netflix’s ways of getting viewers to stream its content for longer.

Techniques for a Higher CLTV

Go above and beyond

Something as simple as going out of your way to do something special can be a way to nurture your existing customers. This can be done by:

Showing them gratitude with personalised messages.

Offering special deals and gifts based on the customer’s personal preferences.

Example – Taco Bell

Taco bell travels to lengths to get their products to the masses. The headquarters of Taco bell learnt that a few pranksters in Bethel, Alaska with a population of 6000 had tricked the townsfolk into believing that Taco Bell was opening up a franchise in the area.

The town was disappointed when they realised it was false. Taco Bell, on hearing this pulled off a “surprise and delight” PR move by airlifting a Taco bell truck filled with 10,000 tacos to Bethel.

Loyalty programs

Loyalty programs are a widely used tool to increase the CLTV for businesses. Customers are rewarded with deals and gifts for staying in the business relationship for a long time.

This technique helps businesses identify their most valuable customers.

Example – Starbucks

An astonishing 16 million active members (as of March 2019) make up the Starbucks Reward Loyalty Program, with an 11% increase in their user base in Q2 2018. The rewards program provides Starbucks with 40% of its total sales.

Store sales have also risen by 7% due to the Rewards Program.

Cross-Selling and Up-Selling

Cross-Selling is one of the easiest ways to increase your CLV if you sell various products or services that complement each other or have different pricing levels. This is also applicable for products that are charged on the basis of usage, seats etc.

Upselling is a technique where a specific product or service is sold for a more expensive version. This might include increasing the service’s scope.

Example – Spotify

The fear of missing out (FOMO) is psychologically proven to be the reason for making more sales. Hence, some of the best examples are based on it.

For example, this advertising of Spotify plans shows everything a user would be missing if they’d taken the free plan. Another example

McDonald’s famous line – “Would you like fries with that?”

The company sells 9 million pounds of fries every day globally with a simple question – “Would you like fries with that?”