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Do You Know Your Customer Lifetime Value?

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Do You Know Your Customer Lifetime Value?

What Does Customer Lifetime Value Mean?

There is no shortage of metrics, goals, and KPIs you are looking to set, follow, and exceed as a business owner. One of them includes Customer Lifetime Value. If you’ve never heard of Customer Lifetime Value or don’t know what yours is, this blog is for you. We’re breaking down exactly what a Customer Lifetime Value is, how to calculate it, why you should know it, and how to increase it. Keep reading to learn more about Customer Lifetime Value and get on your way to increased profits ASAP!

According to Shopify, Customer Lifetime Value is the total amount of money a customer is expected to spend with your business, or on your products, during the lifetime of an average business relationship. This is an important figure to know because it helps you make decisions about how much money to invest in acquiring new customers and retaining existing ones.

Customer lifetime value helps you understand and gauge current customer loyalty. If customers continue to purchase from you time and time again, that’s usually a good sign that you’re doing the right things in your business. Furthermore, the larger a customer lifetime value, the less you need to spend on your customer acquisition costs.

How to Calculate Customer Lifetime Value

Shopify also breaks down a very simple way to calculate your company’s Customer Lifetime Value. They say that understanding how to calculate customer lifetime value is essential for everyone in leadership, especially for a CEO. Knowing how much you can expect from an existing customer can give you a clear and updated picture of the health of your business.

Your customers are VALUABLE. The work of increasing your CLV is extremely worth it. Check this out: If out of every 5 customers, 1 sends a new referral customer, then that’s a 20% increase in your CLV!

Here is their example:

The simplest way to calculate CLV is:

CLV = average value of a purchase x number of times the customer will buy each year x average length of the customer relationship (in years)

So a marathon runner who regularly buys shoes from your shoe store might be worth:

$100 (per pair of shoes) x 4 (pairs per year) x 8 (years) = $3,200

And the mom of a toddler might be worth:

$20 (per pair) x 5 (pairs per year) x 3 (years) = $300

So who should you be paying more attention to? Using CLV, the marathon runner should be your focus!

Why Should I Know My Customer Lifetime Value?

Sounds like your company’s Customer Lifetime Value is a pretty cool metric to keep track of, but should it be essential? Our answer is: Yes! If you are looking to boost your company’s profits, tracking your CLV is one of the easiest ways to do it. Here are some other benefits of tracking your Customer Lifetime Value:

  • Your ad budget. By knowing your company’s CLV, you know exactly how much you can spend to get more of the same customers. It may be higher than you expected, which allows you to get better marketing. It may also be lower than you thought, allowing you to allocate funds to other areas.
  • What a customer spends. Wondering how much an average customer will spend over a period of time? Want more return customers? Tracking your CLV will answer those questions. If you’re looking to increase this number, we have some tips later on in this blog.
  • What products/services to hone in on. What are the customers with the highest CLV spending their money on the most? What product or service is getting the most referrals from your most valuable customers? By knowing the answers to these questions, you will know which products and services you should focus the most of your time and energy on as far as advertising goes.
  • Knowing your target audience. If you’re a long-time reader of our blog, you know that we truly preach knowing your target audience is one of the very first (and best) things you can do for your marketing strategy. By understanding your CLV, you will get to know who your most profitable clients are and what kind of relationships are driving the bulk of your sales. The data will do the speaking for you, and you will be able to note certain patterns, demographics, and other data that can help shape your marketing plans for the future.
  • Identify issues. Is your CLV low during certain times of the year? Is that new product or service just not landing with your target audience? Why isn’t your social media getting the engagement you feel it deserves? Better understanding your CLV can help answer these questions and identify issues that need to be resolved to increase your bottom line.

How to Increase Customer Lifetime Value

Now that you know what a Customer Lifetime Value number is, how to calculate it, and why it is important, your first thought as a business owner might be: How do I increase this number? Whether you want more sales, more clients, or more patients, there are things you can do to increase your company’s CLV. Some of them might be low-hanging fruit, and some of them might require more effort or expertise. At Navazon, we can help you identify which are most important for your business, create these processes with you, and even train your team on how to do it effectively.

Put Customer Service First

One of the easiest things you can do to increase your company’s CLV is to put customer service first. Some easy things you can start doing include:

  • Make it extremely easy for people to reach you. Allow for emails, calls, social media chat, and more. The more options people have to reach you, the happier they will be.
  • Make it easy for people to return items to you. Now, this might sound counterintuitive, but if you make the return process easy and simple, they will be much more likely to purchase from you again.
  • Get them their product or service as quickly as possible, with tons of updates throughout the process. Customers love feeling like they are a priority, so send an email as soon as anything happens. Whether the order is processing, has been shipped, is slated for delivery, or has been delivered, make sure you keep your customers well-updated along the way.

Survey Your Customers

Want to know what your customers like and don’t like? Wondering how you can increase your social media engagement? Or, wondering whether you should change things up for the holidays? Searching for ways to improve your process? Ask your customers!

Customers, especially valuable ones, love feeling like their input is truly making an impact on your business. Some things you can survey your customers on include:

  • How their purchasing process went
  • How a phone call or email thread went with a customer service representative
  • What kind of content they want to see more of or less of on social media
  • Whether you should make more colors or options of a certain product or service

Your best and most valuable customers may have some great advice for you on what they might like to see better or what would make them more likely to give a referral. Listen to them! Give them choices and also room for their own suggestions. Whether it is your core products, services, or your business practices, there is always room for improvement to tailor toward your target audience.

Reward Your Customers

Repeat customers love nothing more than to feel like they stand out, like they are valued, and like they deserve something for being so loyal to you. One of the easiest ways you can encourage more sales is by reaching out to the people who have already purchased from you and making them feel special. Luckily, creating a rewards program to encourage repeat buying or referrals doesn’t have to be super sophisticated or overwhelming. Some easy ideas you can incorporate into your business include:

  • Refer a friend and receive a free month of service or a percentage off future purchases
  • An email with a code for a percentage off a future purchase triggered to send after every purchase is made
  • A weekly or monthly email newsletter with exclusive deals and offers available only to subscribers
  • A birthday gift, perk, or coupon code offered for each customer who gives you their birthdate
  • A good ol’ fashioned punch card with a large reward for filling the card


A very simple way to increase the average value of every customer transaction is by creating upsells. When a customer adds something to their cart, suggest similar or complimentary products of lesser value at checkout. If you are a service-based company such as a dentist, you can still find ways to upsell your clients, such as offering products that you sell or quick and easy services that can be done the same day as their appointment. There are always ways you can upsell your customers, and if you are unsure what that should be, refer to our Survey Your Customers tip!

Stay in Touch

Customers love feeling like they are getting personalized attention. One of the best ways you can do this is by staying in touch with each and every one of your customers. Whether that is on social media, by email newsletter, or by physical mail—whichever your target audience research deems most appropriate—it is essential that you stay in touch with your customers.

Are customers tagging you in social media posts and reaching out in your DMs? Engage back with them! Are they asking for the latest updates, what new stuff is coming up, or how the office renovation is going? Keep them updated! Repeat customers love feeling like they are “in the know” and are receiving exclusive information, so give it to them!

Boost Your Customer Lifetime Value with Navazon Digital

Ready to get to know your customers better and increase your bottom line? Truly understanding your company’s Customer Lifetime Value will get you there, and we can help you figure it all out. After all, we are experts in that.

Navazon helps businesses increase profits through data-driven marketing that expands opportunities and reduces risk. As marketers and entrepreneurs, we understand the value of developing a memorable brand through creativity and consistency. This is accomplished through targeted graphics, videos, and websites that reflect our proven, time-tested methodologies and detailed analytics. It is an approach that’s proven effective for companies of all sizes, from start-ups and medium-sized businesses to large firms with an international presence.

We are content creators who listen to our clients so that we can formulate ideas and strategies based on your unique goals and philosophies. Thinking through those goals with our analytics-based approach, we study not only your tendencies but those of your competition and the market as a whole.

Equipped with this knowledge, we develop a powerful plan, test it and then roll it out on a modest scale. Once we arrive at the winning formula, we can scale up rapidly to meet even the most optimistic growth projections.

At Navazon, we do not believe in “one size fits all.” Every part of the marketing plan is customized to address your unique niche and positioning strategy. It’s how we excel. It’s why we succeed.

Schedule a free consultation with us now! Visit us at navazondigital.com for more information.

Armed with over 10 years of experience in digital marketing, Jaclyn Uloth started her career at a full-service digital marketing firm for five years, guiding many websites to completion as well as developing and executing sophisticated marketing strategies for countless brands. More recently, she was in charge of digital, social media, and paid advertising efforts for well-known multinational franchise operations. Currently, she is using her years of experience and writing abilities to write marketing copy and blogs to boost the online presence of the brands she works with.