Understanding customer lifetime value

Successful businesses have the most loyal customers. To create a sustainable customer lifecycle, businesses need to understand their customers and establish and manage customer relationships. At the same time, businesses should build a community of loyal customers.

What is the customer lifetime value?

First, we need to understand what the customer lifecycle is. This concept describes the different stages that consumers go through before, during, and after completing a transaction. It is the journey from point A to point B that a customer takes until they complete their final purchase. Customer lifetime value (CLV) is the expected revenue that a customer brings to a business during their shopping process.

Why should businesses care about CLV?

Understanding the customer lifetime value will help businesses strategize to maximize the revenue potential of each customer, improve customer acquisition and retain customers longer.

Customers need to be fully cared for at each stage of their buying journey for a business to improve CLV. Many businesses focus on the early stages (reach, acquisition, conversion) but ignore the post-purchase care stages. Businesses should improve and optimise the entire customer lifecycle process instead of focusing on a particular stage. Although the business can gain new customers, those customers are likely to leave after the same buying period.

Businesses can use indicators to measure the success of each stage as follows:

  • Reach: Impressions, branded searches, website visits.
  • Acquisition: Potential Customers.
  • Conversion: Potential or opportunity conversion rate.
  • Retention: Renewal rate.
  • Loyalty: Net Promoter Score (NPS) or Customer Satisfaction Scores (CSAT).

These indicators can be tracked over time (quarterly, annually) and based on industry-wide benchmarks. Comparing business indexes with competitors (i.e. if such data is publicly available) can help address competitive gaps in products or services offered.

How to increase customer lifetime value?

Once customers have become brand advocates, the potential for further sales increases, new product features, trials, or exclusive offers from new products are also a great way to motivate consumers throughout the lifecycle. It’s important that the message conveyed needs to be exciting and relevant to the needs of customers, then businesses will be able to change the behaviour of one-time buyers into loyal customers quickly.

Personalization based on customer data

Businesses that are driving their CLVs with data need to use high-quality data. The first-party data that comes directly from your customers will be accurate. They provide businesses with insights into consumer interactions on their website or app, such as form submissions, product views, and website search queries. This information will help companies to improve content delivery, edit sales ideas, and encourage customers to purchase more. A personalized user experience will lead to a significant increase in revenue.

Increase average order value

To improve CLV, businesses can increase average order value by leveraging bundle methods. Businesses can also offer gifts or discounts to customers who shop next time.

Build relationships with customers

Take care of customers from before, during and after purchase to help them feel comfortable using your products. According to a study from Microsoft, for 90% of Americans, customer service is the deciding factor in whether or not to make transactions with a company.

Good communication with customers is not just about recommending products; but businesses need to understand their needs by actively listening and building relationships. Collect customer feedback and provide them with specific, clear answers and tailor communication channels accordingly.

Recommend suitable products for customers

For customers to stick with businesses, businesses need to make recommendations suitable to customers, such as upsell, cross sell products that meet the right needs, and pointing out the advantages that they should use the company’s products.

Strategies to help manage customer lifetime value

CRM: Customer Relationship Management

Using CRM helps businesses manage their interaction and customer care activities to create loyal customer relationships in the business. A CRM strategy differentiates the customer experience to increase customer lifetime value.

Identifying customer needs through a personalized approach

CRM fosters relationships with loyal customers. The information and customer needs are logically built based on the behavioural analysis feature. Thus, businesses make sales programs and give appropriate campaign messages to increase professionalism in customer relationship management activities.

Adding value to customer relationships

Improve customer satisfaction due to the CRM system that assesses shopping needs and predicts the next shopping period of old customers. Accordingly, businesses can prepare resources and build messages that go directly to each specific customer segment, effectively leading to the next stages in the buying journey.

Provide professional customer care process

CRM manages data from sales and customer service departments. Support to instantly search for information about products and customers to make transactions, and quickly decide to accept or refuse the warranty…


According to data from Gartner, about 80% of a company’s future profits come from 20% of its current customers. Customer retention is an important mission for successful development. Marketing strategies help improve loyalty through customer lifecycle engagement, increasing the likelihood that people will buy again. Marketing strategies to help manage customer lifecycle value:

Track the rate of returning customers

Tracking the rate of customers returning to purchase or visit the store helps measure customer loyalty. To determine the percentage of repeat buyers, businesses compare new customers with old customers.

Collect information

Collect website visitor’s contact information by creating a signup/pop-up form to receive email newsletters. That helps the business gradually penetrate the mind and encourages customers to buy on the website.

Measuring buying trends

Businesses can collect the amount of money that returning customers spend on purchases, if it’s smaller than at the beginning, businesses can experiment with loyalty offers to increase their spending shopping.

Send an email after a customer makes a purchase

That will make a good impression on customers, and they will remember the business’s store brand for future purchases.

Make your customers feel special

When businesses contact or send old customers exclusive offers, they will feel like part of the brand. Once they feel that a brand remembers them and values ​​them, they are more likely to return.

The customer lifecycle  approaches vary widely in different industries. Every brand is special, having unique approaches that are only relevant to the target customers. However, when understanding  customer lifetime value, creating a better customer journey, businesses will do business more efficiently.

IMP provides digital marketing services for global ecommerce companies. Our solutions help businesses increase their profits sustainably and reduce dependency on paid media.