What is CLV?
CLV, or customer lifetime value, is a measure of the average amount of revenue generated by customers during the course of their relationship with a brand. Looking at the economics of customer relationships can be a powerful way of reinforcing the importance of implementing loyalty-building customer experience programs.
How is CLV calculated?
The CLV formula is pretty straightforward. To calculate CLV, determine the amount of revenue per customer over the course of a year and multiply it by the average number of years a customer remains a customer.
To provide a simple example, let’s look at a business that provides flower of the month subscriptions. If the annual price of a subscription is $480 and customers maintain the subscriptions for an average of two years, then the business’s CLV is $960 ($480 X 2).
Granted, most businesses won’t have such an easy time calculating CLV because, for example, it can be difficult to determine if a customer relationship has ended or is just lying dormant. Regardless, organizations should establish their own standards for the CLV calculation and use the standards consistently so they can accurately compare CLV results over time.
Using CLV to drive results
If you consider the two CLV variables, it is very clear how to improve your results – increase revenue per customer or increase the duration of customer relationships or do both.
There are several levers that can be pulled to increase revenue per customer. For example, a business could focus heavily on upselling and cross-selling. Additionally, research shows that consumers are willing to buy more from companies that provide exceptional experiences, so improving CX is another path to higher revenue per customer and higher CLV.
The other variable, duration of customer relationships, can also be addressed by focusing on CX. Implementing a structured customer experience program supported by industry-leading software can help move the needle on CLV as well as other metrics that indicate customer loyalty, such as Net Promoter Scores® (NPS®).
About NICE Satmetrix
NICE Satmetrix is the leading global provider of Voice of the Customer (VOC) software used by the world's most forward-thinking companies to analyze and transform their customer service interactions. Our Customer Journey-based solution combines and analyzes customer interactions, solicited feedback, and operational data at enterprise scale to uncover blind spots, increase customer satisfaction and improve agent performance.
With consumers reaching out to contact centers for more reasons than ever before, providing consistent and optimized experiences is central to fostering loyalty and increasing customer lifetime value. NICE Satmetrix VOC enables businesses of all sizes to grow the value of customer service touchpoints and operationalize customer feedback.
With NICE Satmetrix VOC, the top VOC solution for contact centers, contact centers get access to:
Integrations with NICE inContact CXone and the NICE portfolio of contact center solutions
- Superior analytics
- Digital omnichannel and hassle-free IVR integrations
- Customer Journey-based design
- One-stop-shop for all your contact center VOC needs
NICE Satmetrix is the co-creator of the Net Promoter Score® (NPS®), one of the best indicators of customer loyalty and predictors of business growth. We've instilled our deep knowledge of consumer behavior into our VOC software to make NICE Satmetrix holistic VOC a true one-stop shop for Voice of the Customer with a self-service solution that meets the needs of organizations of every size.