Analyst calculating customer lifetime value
Len Smofsky Oct 30 ,2019

When discussing marketing mixes and how to calculate return on investment, there are many different metrics that come into play.

The amount of budget put towards marketing, the amount of revenue generated by any advertising efforts, and traffic that is directed towards your site are all important numbers to take into consideration when analyzing marketing effectiveness. However, one of the most important statistics your business should be focusing on is Customer Lifetime Value (CLV).

CLV is one of the most useful metrics for assessing marketing strategy, as it allows you to determine how much each customer is worth to your brand, and whether you are spending too much (or too little) on marketing. Naturally, you will want to keep this number as high as possible to maximize your customer relationships.

So how do you go about increasing your customer lifetime value?

There are many different things a brand can do to increase the value of each of their customers. Read on to find out everything you need to know for 2019!


Before we focus on how to increase CLV, we first need to understand what exactly it is.

Customer Lifetime Value (CLV/CLTV), alternatively Lifetime Customer Value (LCV) or Life-Time Value (LTV) is a measurement of the total monetary value of a customer relationship to a brand. It is a prediction of the total amount of net profit a brand can expect to receive from an individual customer either directly or indirectly.

This makes CLV one of the most important litmus tests of how a marketing strategy is working, and places an upper limit on how much money should be spent on attracting new customers. After all, you would not want to spend more money on acquiring a customer than they would ultimately be worth to your business.


Calculating CLV is more of an art than a strict science, and there are many different models that can be used to varying degrees of accuracy.

The essential CLV model can be calculated by applying the following formula:


where the margin and retention rate are considered constant in a given time period. This model also assumes that once a customer is lost, they are lost for good and cannot be regained as a customer.

For businesses that have a fairly constant margin and retention rate, this model can provide some basic predictive capabilities for how much a customer is worth over the course of their relationship with the business. However, many businesses experience significant fluctuations in margin and retention rate, over the course of a year and across a longer time frame. Furthermore, most businesses have the capability of winning back a customer once they have left, making the model marginally inaccurate for many businesses.

The most accurate method for calculating CLV is by taking into account the net present value (NPV) of any profit source, accounting for the value of money in the future. As inflation rates increase as you move into the future, the value of money will change, meaning to get a truly accurate representation of what a customer will be worth far into the future, the value of the money they bring in will need to be adjusted for future inflation rates.

This requires a significantly more complex and sophisticated model than many businesses require, but if forecasting for decades into the future, it is worth investigating as the compounding effects of inflation will increase over time.


When it comes to Customer Lifetime Value, the most important question is then – how do we increase it?

There are many different things that a business can do to make every customer more valuable to them over the course of the relationship, whilst providing more value to the customer at the same time.


One of the biggest ways any business can improve their CLV is through enhancing their customer onboarding process.

A poor customer onboarding process is one of the leading causes of churn for any business, accounting for up to 23% of all churn. If a potential customer has to work too hard to become an actual customer, they will likely drop out of the sales funnel and your bottom line will take a hit.

Improving your onboarding process can mitigate this risk and have a significant impact on your revenue and retention rates. Personalized video is an innovative new method of welcoming customers to your brand by creating a personal experience that instantly creates positive brand sentiment. By turning what was traditionally a static, text-heavy process into an engaging and entertaining video, customers will be more likely to complete onboarding and boost their CLV.


Modern digital marketing is laser focused on driving more customer engagement, and with good reason; a fully-engaged customer is likely to spend over 20% more on average throughout the lifetime of their brand relationship.

Thus, any business looking to improve their CLV should aim to enhance customer engagement. This can be achieved through regularly updated blogs and social media channels, experiential marketing efforts, and newsletters. Creating a feeling of brand love through engagement can lead to customers becoming brand evangelists, who provide free publicity and positive word of mouth to their network of influence.

Once again, personalized video is a great tool for improving customer engagement as well. Video content has been shown multiple times to generate the most engagement out of any other type of media. Specifically, personalized video has the potential to drive even more engagement amongst consumers, with some 83% of individuals saying they would be likely to share a video on social media if it was relevant to their specific interests.


Offering each customer an experience that is tailored to their specific wants and needs is another effective way of increasing retention rates and supplementing CLV.

Customers have more choice than ever before when it comes to practically every purchase decision, which means they are now more discerning and selective when it comes to the experience they expect from their brands. Generic communications, statements, and responses are no longer effective in retaining customers, as a higher degree of personalization is now expected across every vertical.

Once again, personalized video allows brands to offer this personalization to their customers with minimal internal lift. IndiVideo is a cutting edge personalized video platform that allows brands to easily create highly personalized videos for every customer with seamless integration with their current marketing platform. Not only can videos be customized to a particular customer’s needs, they can also be made interactive. This allows for the collection of more user data, which can further enhance personalization as well as provide valuable insight into consumer intent.

In 2019, brands cannot afford to ignore the power of a heightened Customer Lifetime Value. Introducing marketing strategies that improve this metric not only increase profitability, but also make your brand more useful to your customers. This improves the chance of deepening brand loyalty and increasing overall engagement and lifetime spend during the brand-customer relationship.

About the author: Len Smofsky

Len Smofsky

Len has over 25 years of experience in visual communications and strategy. Over the last decade his focus has been primarily in the digital area.

Specializing in corporate communications, Len founded one of Canada’s most successful production companies. His company created leading edge video production, TV commercials, digital strategy and media.

In 2006, Len and Larry formed a partnership to create a new BlueRush with the intent of creating personalized customer experiences using a unique blend of digital media and deep technology capabilities. BlueRush works with clients in the financial services, healthcare and packaged goods industries leveraging current digital technologies and services, creating great user experiences at all points in the customer journey.


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