How to calculate Customer Lifetime Value
Posted: Sun Jan 26, 2025 9:35 am
CVL's relationship with the customer
In this particular context, the customer – who has always been at the centre of strategies and working formulas – finds himself instead playing a passive role.
In the CVL it becomes one of the empirical data of the formula. And, above all, the study tool from which to start to calculate the possible profit that the company manages to obtain from a bilateral relationship.
There is no universal and univocal way to calculate the CVL. In order to have an vp r&d email lists indicator as close in projections to what will be the reality, it is in fact necessary to take into account some variables and many elements.
However, in order to simplify the calculation of this data as much as possible, it is necessary to take into account three fundamental elements.
The calculation of the Customer Lifetime Value cannot ignore the average duration of the relationship between the company and the customer; the average expense that a company must sustain towards the customer and the company profit margin obtained as a percentage of the expense made in favor of the customer himself.
What is the formula to calculate it?
Customer Lifetime Value is obtained with a simple operation. The company calculates the total revenue obtained from a specific customer. Obviously, in carrying out this calculation, it is necessary to take into account only a specific and precise period of time. From the sum obtained, the expenses that - in the same period of time - the company has sustained for the customer must be subtracted. The result obtained from this subtraction is precisely an example of CLV.
The Difference Between Customer Lifetime Value and Lifetime Value
Customer Lifetime Value and Lifetime Value are often used as synonyms. In reality, they do not indicate exactly the same data.
Both, it should be specified, are used to calculate the profit that a company expects to obtain from its relationships with customers. However, the CLV indicates the potential revenue that can be obtained from a single customer, the LTV - on the contrary - is concerned with calculating the potential revenue that can be obtained from the totality of the company's customers.
In this particular context, the customer – who has always been at the centre of strategies and working formulas – finds himself instead playing a passive role.
In the CVL it becomes one of the empirical data of the formula. And, above all, the study tool from which to start to calculate the possible profit that the company manages to obtain from a bilateral relationship.
There is no universal and univocal way to calculate the CVL. In order to have an vp r&d email lists indicator as close in projections to what will be the reality, it is in fact necessary to take into account some variables and many elements.
However, in order to simplify the calculation of this data as much as possible, it is necessary to take into account three fundamental elements.
The calculation of the Customer Lifetime Value cannot ignore the average duration of the relationship between the company and the customer; the average expense that a company must sustain towards the customer and the company profit margin obtained as a percentage of the expense made in favor of the customer himself.
What is the formula to calculate it?
Customer Lifetime Value is obtained with a simple operation. The company calculates the total revenue obtained from a specific customer. Obviously, in carrying out this calculation, it is necessary to take into account only a specific and precise period of time. From the sum obtained, the expenses that - in the same period of time - the company has sustained for the customer must be subtracted. The result obtained from this subtraction is precisely an example of CLV.
The Difference Between Customer Lifetime Value and Lifetime Value
Customer Lifetime Value and Lifetime Value are often used as synonyms. In reality, they do not indicate exactly the same data.
Both, it should be specified, are used to calculate the profit that a company expects to obtain from its relationships with customers. However, the CLV indicates the potential revenue that can be obtained from a single customer, the LTV - on the contrary - is concerned with calculating the potential revenue that can be obtained from the totality of the company's customers.