How is Customer Lifetime Value Measured?

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To calculate customer lifetime value, which predicts the total revenue a company can reasonably expect from a single account, you need to calculate two factors: the average purchase value and the average purchase frequency rate.

Average Purchase Value: Divide your company's total revenue over a period of time (usually a year) and multiply the result by the number of purchases during the same time period.
Average Purchase Frequency Rate. Divide the number of purchases over the same time period by the number of unique customers who made purchases during that stage.
Once you have this data, you must calculate the following formula:



CLTV = Average Purchase Value * Number of Repeat Purchases * Average Customer Lifetime (Year/Month/Week)



Importance of CLTV in your Company
Calculating your company's CLTV is essential to get a morocco business email list clear picture of your company's growth. By analyzing CLTV in relation to CAC, you can determine how long it will take to recover the investment you made in acquiring customers, and calculate the costs invested in marketing and sales.

CLTV will help you know how much you can spend on customer acquisition and, thanks to its predictive feature, how much money your company will make in a given period.

The basic rule is to never spend more on acquisition than the CLTV value.

Bearing this in mind, it is important to remember that it is always more profitable to retain existing customers than to acquire new ones. The costs required for retention are significantly lower than those for acquisition.

Another reason why it is important to know the Customer Lifetime Value of your clients is that it allows you to effectively identify which consumer segment can generate greater income and to which you should dedicate greater investment and effort.