Customer lifetime value modelling

A customer lifetime value (CLV) is one of the most important metrics in marketing, outlining the total value a company is expected to reap from a customer relationship. But how can a marketer determine a customer’s lifetime value? And what modelling provides the best outcome? Rokas Salasevicius and Justas Jankunas from management consultancy CIVITTA shed light on the topic. 

While there are different definitions of customer lifetime value, at CIVITTA we follow the following definition: “Customer lifetime value is a concept which estimates how much money the customer is going to bring to a company in the long run.”

Calculating and tracking customer lifetime value is of huge importance for marketers, for a number of reasons. First, it enables marketers to observe the business – CLV is used as one of the KPIs that provide information about the health of the business and customer base. CLV allows understanding how strong the current customer base is and track how it is changing over time, as well as identify reasons why it is changing.

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