CLTV

Views:
 
Category: Education
     
 

Presentation Description

Customer Lifetime Value

Comments

Presentation Transcript

Customer Life Time Value:

Customer Life Time Value Presented By: Dinesh Taparia

Meaning::

Meaning: Customer Lifetime Value means the economic value of customer relations during the whole period of relation between customer and company. Customer Lifetime value is a marketing term used to calculate how much money a single customer will bring to a company's profits over the course of that customer's life. Customer lifetime value has intuitive appeal as a marketing concept, because in theory it represents exactly how much each customer is worth in monetary terms, and therefore exactly how much a marketing department should be willing to spend to acquire each customer. In reality, it is difficult to make accurate calculations of customer lifetime value.

The objectives of calculating CLV: :

The objectives of calculating CLV: Acquisition : You’ll have a better understanding of what you can spend to acquire customers. Targeting: You’ll know which customer segment delivers the most profit to your company and you can focus more marketing efforts toward that segment. Return on investment : By using CLV in your ROI calculations for marketing campaigns, you’ll have a much more accurate measure of campaign performance. Customer retention : You can determine how much you can spend to profitably retain customers. Single-customer profitability : You can calculate the profitability of an individual customer.

Customer Acquision Cost for a Website:

Customer Acquision Cost for a Website Website Development Cost Rs.: 24000 New Customer Per Month: 100 Estimated life of Website (Months): 24 Monthly Promotion Cost Rs: 2000 Monthly Maintenance Cost Rs: 250 Customer Acquisition Cost: Website Development Costs / Expected Life of website) + Monthly Promotion Costs + Monthly Maintenance Costs New customers 24000/24 + 2000 + 250 100 3250/100 = 32.5 Rs. Per Customer

What is Your Customer’s Lifetime? (Customer Retention Rate):

What is Your Customer’s Lifetime? (Customer Retention Rate) To calculate your retention rate, take the number of customers from last year who are still customers this year — that is your retention rate. If you had 100 customers last year and 45 are still doing business with you this year, then your retention rate is 45%. CL = 1/(1-RR) In this case, CL = 1/(1 – .45) = 1.5 Your customer lifetime is 1.5 years.

Formula for Customer Referral Cost:

Formula for Customer Referral Cost

Customer Lifetime Value:

Customer Lifetime Value S = Average revenue per customer per sale C = Costs of servicing customer V = Expected # sales per year Y = Expected # years customer will use your services A = Cost of acquiring new customer N = # of referrals from customer F = Correction Factor Lifetime Value of Customer (CLV) = [(S-C ) * ( V*Y ) – A +( A*N )] * F OR Margin * sales – cost of acquisition + savings from referrals * correction factor

PowerPoint Presentation:

S = Average revenue per customer per sale C = Costs of servicing customer V = Expected # sales per year Y = Expected # years customer will use your services A = Cost of acquiring new customer N = # of referrals from customer F = Correction Factor S = Rs. 1,200 C = Rs. 150 V = 6 Y = 5 A = Rs. 400 N = 2 F = 1.2 CLV = [(1200-150) * (6 * 5) – 400 + (400 * 2)] * 1.2 CLV = Rs. 38280 Customer Lifetime Value of Big Bazaar Hypothetical Example

ILLUSTRATION - 2:

ILLUSTRATION - 2

authorStream Live Help