EVERNILE

How to calculate Customer Lifetime Value

The strategic metric of Lifetime Value (LTV) is critical to any business for gauging their long-term profitability. Utilize advanced ML algorithms for precise predictions, factoring in customer lifespan and repeat behavior amid a multitude of factors

The Approach

Making it Happen

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Mathematically, CLV = (Churn Probability) * (Expected Number of Transactions) * (Avg Value of Each Transaction) * (Profit Margin)

Calculating CLTV involves leveraging advanced machine learning & statistical techniques to precisely estimate each component for each customer.

Implementation involves integrating CLV insights into strategic decision-making processes. It can help in optimizing marketing budgets, refine customer acquisition strategies, and prioritize high-value customer segments.

Another critical aspect for brands is regularly updating CLV calculations, providing them a dynamic understanding of shifts in customer behaviors and market conditions. This iterative approach empowers businesses to intervene proactively and adapt strategies for sustained growth and profitability.

Designed a 12-month CLV prediction model for a ecommerce marketplace:

Integrated insights from the CLV analysis with an established short-term Churn Framework to create strategic goals for each cohort
Launched a loyalty program for the top 10 percentile customers (also named ‘Power Users’) with early access to collections, free delivery & other benefits

Over a span of two years, this dynamic framework has propelled a ~4% enhancement in the 12-month CLV of their customers.