Acquiring a Lifetime of Value

Besides cost-acquisition, there’s another equally important KPI that any growing company should be keeping tabs of: customer lifetime value (CLV). Customer Lifetime Value indicates how much total revenue a business can expect from a single customer in consideration to their revenue value and predicted lifespan. The longer a single customer purchases goods or services from a company, the more their lifetime value will increase. Measuring CLV in relation to cost of customer acquisition (CAC), companies are able to figure out exactly how long it will take to recoup their initial investment in a customer and create a plan to retain them.

Online, there are many different variations of CLV formulations, and quite frankly, most CRM tools will easily show you both CAC and LTV. One thing that does remain constant however, it is substantially more expensive to gain a new customer than to retain an existing one (remember the 80/20 rule?). If companies spend the time nurturing the most valuable customers that interact with them, they’ll be decreasing the costs associated with luring in new customers and increase profits.