How to Increase Customer Lifetime Value in 4 Steps

Customer Lifetime Value

Customer lifetime value (CLV) is a marketing metric that measures the overall financial value of a customer over her entire relationship with your business. It’s an important consideration for any marketer and can help you better understand how to optimize your marketing efforts for maximum ROI. In this article, you’ll learn how customer lifetime value works, why it’s important and how it helps marketers understand customer retention strategies.

Understand who your highest-value customers are

The first step in increasing customer lifetime value is to understand who your highest-value customers are. There are several ways to identify your best customers: through their spending habits, their interests, previous purchases, or services used. You could even use data collected from social media sites like Facebook or Twitter.

Another way to determine who your high-value customers are is by using an algorithm that takes into account all of these factors—and more—to create a score based on their value as a customer. If you’re not familiar with algorithms, think of it as an equation based on real data points that predicts how likely someone is to become a loyal customer based on those same factors. Once you know who they are and what makes them different from everyone else, then it’s time to think about keeping them happy so they stick around longer than average.

Identify what keeps them loyal

A loyal customer base is the holy grail of business. They’re more likely to buy from you, they’re more likely to recommend you, and their lifetime value is higher than that of a non-loyal customer. That’s why it’s so important for businesses to identify what makes customers loyal and continue doing those things.

It seems obvious (and it is) but three main things keep customers loyal:

  • A good product or service
  • A good reputation (this goes far beyond just reviews)
  • Good customer service

Figure out how much to spend on customer retention

Before you can calculate how much to spend on customer retention, it’s important to understand the costs associated with acquiring new customers. The cost of acquisition (CAC) is the total amount spent on marketing efforts that bring in customers. This includes advertising, outbound sales calls and cold emails, telemarketing campaigns, and even search engine optimization costs.

In contrast, the cost of retention (CR) is the amount spent on keeping existing customers happy so they don’t leave your business for another company’s product or service. CR includes things like post-sale support via email/phone and one-on-one sessions with customers where you answer questions about how best to use your product or service in their particular situation.


A business is better off focusing on retaining customers than trying to acquire new ones. This is because you’re dealing with low-cost customer acquisition costs and high-cost customer retention costs. Therefore, make sure your business model has a customer retention strategy in place. This will ensure that you’re spending your money wisely and not wasting resources going after new customers when existing ones are ripe for the picking.