{"id":17261,"date":"2023-03-17T13:14:45","date_gmt":"2023-03-17T11:14:45","guid":{"rendered":"https:\/\/www.become.co\/blog\/?p=17261"},"modified":"2023-07-23T13:11:51","modified_gmt":"2023-07-23T10:11:51","slug":"ways-to-calculate-customer-lifetime-value","status":"publish","type":"post","link":"https:\/\/www.become.co\/blog\/ways-to-calculate-customer-lifetime-value\/","title":{"rendered":"5 Tried and Tested Ways To Calculate Customer Lifetime Value"},"content":{"rendered":"\n

What\u2019s the real value of creating a happy customer? That really is the million-dollar question in the world of e-commerce.<\/span><\/p>\n

Online business owners stay on the grind day-in and day-out to attract customers and keep their stores generating revenue. It\u2019s not always easy or cheap, especially for those who aren\u2019t actively monitoring the data behind their businesses. Oftentimes, it can be even harder to track how your business is doing than to generate revenue in the first place.<\/span><\/p>\n

There are plenty of metrics that e-commerce business owners can (and should) focus on in order to improve store performance – and one of the most important data points to track and calculate is customer lifetime value.<\/span><\/p>\n

Scroll down and get the full guide on the importance of customer lifetime value.<\/span><\/p>\n\n

What is customer lifetime value?<\/span><\/h2>\n

Customer lifetime value (CLV for short) is a metric that aims to define how much money the average customer can be expected to spend at your business from the time of their first purchase until their last purchase.<\/span><\/p>\n

There are a number of different customer lifetime value formulas that you can use, and we\u2019ll discuss them in more detail below. To start with, here\u2019s a basic customer lifetime value equation:<\/span><\/p>\n\n

\"Customer<\/p>\n\n

This is one of the most simplistic equations you can use to calculate customer lifetime value, but makes sense without having to think too hard about it. If you measure how much revenue your business totaled within a specific timeframe (<\/span>total accumulated revenue<\/b>), and then divide by the total number of customers within that timeframe (<\/span>total number of customers<\/b>), you get the average customer lifetime value.<\/span><\/p>\n

A simple and quick formula for average customer lifetime value in ecommerce is good, but precise calculations are better. We\u2019ll dive into the nitty-gritty about how to more accurately calculate customer lifetime value in just a bit, but first…<\/span><\/p>\n\n

What is the importance of customer lifetime value in e-commerce?<\/span><\/h3>\n

It\u2019s hard to over-exaggerate the importance of calculating customer lifetime value for your e-commerce business. Knowing your business\u2019s CLV gives you a broader perspective on your business\u2019s profitability and can even help you <\/span>overcome e-commerce challenges<\/span><\/a> such as:<\/span><\/p>\n