Post Covid the basic human life style changes have started to happen. To put it in a nut shell, slowly the mouse and keypad will be antique pieces and “voice and hand gestures” will be the new user interfaces with all the devices. Don’t be surprised if your 55-inch TV becomes absolute as more and more wearable glasses or even contact lenses are your basic visual devices. We all would be having our very own Virtual Assistants who will help us through out the day doing all the work and chores. Therefore, the predicted mobile traffic by 2025 is going to be more than 100 exabytes.

With so much talk on technology, where does it leave the marketing teams of the future? The digital trends used for marketing are bound to change as more of Artificial intelligence, Voice search and gestures, mobile oriented campaigns and emotional visual content will be used. But having used all these latest or future technologies, how do you measure the ROI? The future marketeers who may refuse to acknowledge or ascertain the returns will not succeed and fade out soon. Irrespective of the trends or means of marketing the one thing we all need to keep in mind is the “Customer Lifetime Value.”

What Is Customer Lifetime Value (CLV)?

Customer Lifetime Value (CLV) is the total income a shop / company / establishment can expect to bring in from a person/customer for as long as that person/customer remains a client. In more general terms it means the total average revenue generated by a customer and the total average profit. The figures can be co-related to see if your marketing plan is working as expected or not by comparing the CLV with the Cost of Acquiring Customer (CAC)

Typical example of a CLV

To better understand the CLV, let’s have a look at a typical example – A spare parts supplier of textile machines. In case of this company, the average customer may visit two times a month to order spare parts.

Rs 50,000 value x 2 times x 12 months x 5 years = Rs 60 lakh = CLV

The marketing activities of this company may include online advertising in social media, print advertisements, taking part in exhibitions etc plus cost also includes the salaries of all persons and other overheads. (Cost of Acquisition of the Customer)

The simplest way to know if your CLV is working or not, is to compare it with your CAC and both must be compared for the same time period.

So, for example Rs 50,000 x 2 times a month = Rs 100,000/- is the CLV for the month

Comparing it to the fact that for same month if the CAC is Rs 15,00,000/- and the number of customer acquired are 15 then the CAC for that month is 15,00,000 + 15 = Rs100,000/-

In this case the CLV is exactly matching the CAC. So best way to increase the CLV (there by making profits) is to make the customer purchase more often and also increase his/her sales value per visit

Earlier in the example, we have assumed that the customer will be our client for 5 years. Therefore, the key takeaway here is that our marketing activities should be able to get us repeat customers who will give us a higher CLV. The aim here is to get the customer to buy from us again and again.

Should we give importance to Customer Lifetime Value?

Yes, it should be given importance as all businesses stay alive because of repeat customers. So, to measure whether the customers are coming again to you or not, you need either a robust ERP or a CRM system. Once you know your target customers, you can employ specific strategies around pricing, sales, advertising and customer retention to continuously reduce costs and increase profits.

Not only spare parts suppliers but all companies, whether medium or large, can ascertain who their loyal and repeat customer are and give focused attention to them to increase profits. Loyalty discounts can be given to avoid customer attrition.

Better CLV forecasts help you maintain a better inventory, plan production properly and avoid overspending by having finished goods pending deliveries. In this process the customer also feels happy in doing business with you for a longer duration thereby automatically giving a higher CLV.

In which way do we increase our CLV?

There are many different ways companies can adopt to boost their CLV. The following basics could be adapted as per needs:

  • Digital strategy on social media platforms

Creating a buzz for your product or services is a must. The best way to reach to the customer is through his or her mobile device. Create your campaign in such a way that it reaches your target audience through WhatsApp, YouTube, Instagram, Facebook, Twitter etc . Create a campaign that has a higher recall value, where by even if the requirement is not now, but whenever the need arises, the customer must think of your brand and make the purchase.

  • Identifying the new customers

A first-time new customer is a gold mine. It needs to be made sure he gets a superior customer pre and post sales experience so as to come to you again. Turning a one-time customer into a source of recurring revenue is essential for growth of all businesses.

  • Give attention to “Complaining Customer”

Always know that if a customer is complaining then it means he/she still wants to be with you. Give all your attention to such customers to resolve any big or tiny issues they may have. Remember, if they don’t complain, it probably means they have gone over to your competition.

  • Simple and easy to use website

Your website is the first touchpoint for all customers. If customers enjoy a smooth, stress-free shopping experience every time, they are more likely to return for repeat business. Selection of products for the cart and check out methods should be as user friendly as possible.

  • Happy Customer testimonies

Take customer testimonies from happy customers and publish on your social media platforms like YouTube and LinkedIn. The word-of-mouth publicity given by a customer directly is worth more than spending huge amounts on advertisements.

  • Increase Pricing

If you are sure the features and novelties of your products are not available anywhere then increasing the prices without scaring the customers is a good way to increase CLV. Most customers don’t mind paying a premium if the product is very good.

  • Content for marketing

Videos, e books, pod casts, photos, blogs, articles, quizzes are popular forms of targeted content that can get you connected to particular segments of your customers. A perfectly designed content can be strategically used to market and educate or entertain your ideal customers. This helps us in brand building and gets trust and loyalty of customers.

We can conclude by saying that calculating CLV is an essential part of marketing activity as it directly affects your revenue and boosts the profits. Depending on your type of business and volumes, the figures may vary but the basic concept remains same to retain customers. Identifying the ideal customers is done and converting them into loyal customers becomes very easy.


Rajesh Balkrishna Padalkar

Principal Owner

BLKRSNA Media.Events.Hospitality