Most sales and marketing take advantage of Customer Lifetime Value ton examine the amount of gross profits being generated from the customers during the entire time doing business with the company.
Customer Lifetime Value Overview
To every sales or marketing team, a knowledge about understanding the total value of the added customer is very crucial. Using this metric, the company is able to monitor how much revenue every new client or customer can bring into the company throughout the lifetime.
What is the formula for Customer Lifetime Value
To formula for this metric is : Gross margin (%) x Length of lifetime in pay periods x Revenue per subscription per pay period.
The reporting frequency of Customer Lifetime Value is quarterly and the target audience are CEOs, CMOs, CFO, marketing managers, and sales managers.
The variations are LTV, CLV, and lifetime value of a customer.
The Importance of Customer Lifetime Value to the Marketing Team
Through this metric, business owners are able to make important business decisions with regards to product development, sales, marketing, and customer support. By measuring Customer Lifetime Value for each marketing channel, the team can easily identify which channels acquire the most valuable users as well as minimize the churn by nurturing the customers who have the highest LTV score to maximize the business growth.
Thus, the Customer Lifetime Value serves as a great indicator for businesses who are planning for future growth and acquire new opportunities.