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Customer Lifetime Value intermediate

Applications & Use Cases

One particular application of CLV is to look at CLV by acquisition medium, source, channel, and campaign. That is, to look at the CLVs of customers acquired through CPC, Facebook, or display advertising, for example. As before, you want to measure CLV in order to determine whether you are underspending or overspending to acquire customers. By looking at individual CLV by acquisition channel, you can do a better job of assessing whether you should spend more or less on that channel. For example, a marketer may focus on finding undervalued keywords to acquire customers very cheaply, when instead there may be overpriced keywords that attract customers that are worth far more than the extra cost of a keyword.

This CLV analysis can be applied to other metrics, such as coupon codes, Groupons, or landing pages. In particular, you want to think about the different “levers” your marketing team has, the types of things you can change in order to drive different consumer behaviors. In addition to acquisition sources and spending, you can also compute segment CLVs by which product was first purchased or most popular product category, to name a few. This type of CLV analysis can lead to many insights; for example, a customer who first buys a low-margin item might appear to be low value on the surface, but if it turns out those customers are more likely to become repeat purchasers of high-margin products than those who initially bought high-margin products, you may change how you think about what you show on your homepage or what products you feature in advertisements.

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