Customer Lifetime Value cover

All you need to know about Customer Lifetime Value

Free Download: Enhance NPS® Scores using our NPS® Survey Templates


In today’s market landscape where most of the businesses are focusing on acquiring new customers, retaining the existing clients has been highly understated. Despite the fact that it costs 5 times to attract a new customer than retain an existing one, 44% of brands invest time & money on acquiring new customers while only 18% focus on retention. According to research by Bain & Company, a 5% increase in customer retention yields more than a 25% increase in profits. 

MicrosoftTeams image 15

Irrespective of the brand name and size, retaining customers and establishing healthy relationships with them is extremely important for keeping the business up and running. That’s where the need for Customer Lifetime Value arises. 

What is Customer Lifetime Value?

By defining a customer’s value to a brand over a specific time period, Customer Lifetime Value is a metric that indicates the total profit a business can expect from a particular customer account. The Customer Lifetime Value plays a pivotal role in identifying the customer segments that matter most to the brand. 

If a customer keeps on purchasing from a brand, it brings in more revenue, thereby ensuring a high lifetime value. Moreover, by gaining insights into the customer’s worth to a company, this metric helps business owners understand how much they should invest in retaining customers.

Why Customer Lifetime Value matters?

One of the key reasons behind using the Customer Lifetime Value metric is customer retention. According to Gartner, 80% of future profits come from just 20% of existing customers. As every customer brings a different level of revenue, it’s important to evaluate how much you need to invest in retaining each of them. Leveraging Customer Lifetime Value (CLV) into your marketing strategy helps to minimize acquisition costs while keeping retention high. Moreover, Customer Lifetime Value helps you solve queries like: 

  • How much do I need to invest in acquiring a customer? 
  • How much do I need to spend for retaining my existing customer?
  • Do my offers resonate with the needs of my customers? 
  • How much time & effort should my sales representatives invest in acquiring new customers? 

How to measure Customer Lifetime Value?

The customer lifetime value is calculated by multiplying the following data points: 

  • Purchase frequency – It indicates the rate at which a customer buys in a specific unit of a lifetime.
  • Average order value – It represents the mean value of the orders placed by a customer and can be calculated by dividing the total revenue by the number of orders. 
  • Lifetime – It is the expected duration a customer stays active and engaged on your platform.
  • Profit margin –  It is the ratio of profits and can be calculated as revenues minus costs, to revenue.


MicrosoftTeams image 13

How Surveys can drive your Customer Lifetime Value?

Delivering an excellent customer experience (CX) is the secret sauce to retaining customers and simultaneously increasing the customer lifetime value. Leveraging customer satisfaction surveys can empower brands to uncover actionable data for understanding the key drivers behind customer experience.

According to Ernst and Young, a company’s customer lifetime value faces a loss of more than $500 every time a customer has a poor experience. Sending a survey can help to transform feedback into growth and boost customer satisfaction too! Using Net Promoter Surveys (NPS® ) is a widely used method for gauging customer satisfaction for the following reasons:

  • Short and Concise: NPS® comprises of one question only (followed by an open-ended feedback question), which makes it easy for the customers to complete this survey in less than 10 minutes.
  • Comes with a versatile scale: It works well with all levels of interactions between a brand and its customer. Also, it can be used for new as well as existing customers.
  • Indicates Customer Loyalty: Based on the experiences of the customers, they select the “likeliness to recommend” a brand to their friends or colleagues. This helps to uncover the sentiments of the valuable customers which is directly proportional to customer lifetime value.  

Voxco offers best-in-class NPS® surveys that help you gather actionable data at important touchpoints along the customer journey. By understanding how customers feel about each aspect of your product or service, you can easily turn your detractors into promoters and increase their customer lifetime value (CLV). To improve your Net Promoter Score® and stack up against industry competition, you can use Voxco’s free NPS® Calculator.    

Free Resource

Download 5 Customer Experience Survey Templates

Turn detractors to promoters. Increase Customer Loyalty. Get more customer referrals.

Fill out this form to access templates

Increasing Customer Lifetime Value the right way

  • Offering a seamless onboarding
    Being the most crucial part for increasing customer lifecycle value, onboarding determines the tone for your budding relationship with the customers. As brands lose 75% of their new customers within the first week, it’s imperative to focus your efforts on onboarding for ensuring sustainable business growth. Since it’s the stage where a customer engages with your brand for the first time and you never get a second chance to deliver a great positive impression, it is important to make every encounter count. Moreover, 40 to 60% of free trial users never come back after using the product once. Leveraging effective onboarding can help to transform them into raving fans. The goal of your onboarding strategy should be retaining your customers and setting them up for long-term success.
  • Providing valuable and engaging content
    Being one of the best ways to capture the customers’ attention and retain them, content marketing helps to place your brand in the front and center of a user’s mind. While 80% of people appreciate learning about a company through custom content, creating emails that emphasize your product value could be of great help (from a CLV perspective).
    As 60% of customers enjoy reading relevant content from brands, it’s important to map their journey and identify the key touchpoints for setting up a personalized campaign for your audience. Here’s how you can make the most of your content marketing for increasing the Customer Lifetime Value:
      • Be entertaining: No matter if you create an article, set up an email, or a humor post, always ensure that it solves the problem/concerns of your target audience. This helps to boost engagement exponentially.
      • Be interactive: Don’t forget to respond to customer comments or feedback on social media posts. If they share your content collaterals, thank them. This helps to deepen the customer’s relationship with your brand which further promotes loyalty!
      • Be consistent: When your aim is to retain customers, it’s essential to produce a consistent and steady stream of content. Be it publishing an article on a weekly basis, conducting a regular podcast, or scheduling a monthly newsletter.
  • Ensuring top-notch customer service
    Customer service plays a critical role in the success of a business. No matter how good your product is, if your customer service is below average, retaining customers will always be a daunting task. As one-third of customers are likely to switch companies after one instance of poor customer service, delivering exceptional customer service matters more than ever. According to Microsoft, sending proactive customer service notifications can help to improve the brand perception in 68% of customers. So, how to offer a service that retains customers and boosts customer lifetime value?
      • Going omnichannel: As customers use multiple devices to shop across multiple channels, adopting an omnichannel strategy for retaining customers has become the need of the hour. In fact, companies with omnichannel customer engagement strategies are likely to retain 89% of their customers. Not to mention 98% of Americans switch between devices on a daily basis. Identifying the channels your customers use the most can help you ensure your support team is ready to cater to them. Moreover, you can also create different teams for handling every individual channel (if budget is not the concern).
      • Providing round-the-clock support: There’s no doubt that customers expect a quick response to their queries and support concerns. Offering 24/7 support can play a key role in minimizing customer issues to a large extent. According to research, 52% of customers accepted to make an additional purchase from a company that offers a positive customer service experience. Despite offering 24/7 support, train your customer service agents to resolve customer queries as soon as possible (even on the heavy-traffic channels).
      • Monitoring social media channels:  Do you know 84% of customers expect brands to respond within 24 hours after they post a complaint on social media? whereas in the case of Twitter, 72% of users expect the companies to respond within an hour. If your brand fails to provide good customer support, then the customer complaints can get amplified on social media which negatively impacts the brand reputation. Considering the risks, your support team needs to have one dedicated resource for tracking and responding to customer queries on social media. Although, you need to prioritize their complaints first.
      • Offering a knowledge base: Being an eminent part of the support infrastructure, a knowledge base includes self-service articles, user guides, tutorials, and other documents related to support. As per research, 91% of customers would prefer using a Knowledge Base over contacting a support agent, making self-service an effective way to customer support. Moreover, 70% of customers are likely to use a company’s website for solving their queries instead of reaching out to the support team via email or phone. Using an effective knowledgebase can keep your customers happy (by solving their queries quickly) while taking off some pressure from the shoulders of your support team (allowing them to work on more important & urgent tasks).
  • Identifying customer’s pain points
    One of the most commonly used tactics for increasing Customer Lifetime Value is by gathering your customers’ feedback and identifying the common issues they’re facing. As discussed earlier, sending customer satisfaction surveys like NPS® can streamline this data collection process to a great extent. By soliciting feedback from detractors (who are NOT satisfied with your brand) and passives (who like your brand but not likely to promote it), you can easily detect the pain points that your users are experiencing. Once you’ve successfully identified their complaints, you need to prioritize them (on the basis of their occurrence) and share them with the concerned departments by granting access to the required data. It’s recommended to fix these problems as soon as possible.
  • Offering personalization across every stage
    In today’s time, personalization has become a key differentiator for keeping customers happy and making them invest in your business. As 73% of customers are likely to shop from brands that personalize their overall experience, offering a bespoke journey to the customers has become crucial for the brands. While businesses with the highest personalization ROI are 50% more likely to focus on customer loyalty and almost twice as likely to focus on increasing customer lifetime value, adding a sense of personalization can positively shape the ‘company-customer dynamics which in turn contributes to business success. According to a report by Infosys, personalization can drive long-term customer value by influencing the buying decisions of 86% of customers.Here’s how personalization can help you uplift your customer lifetime value:
    • As 8 in 10 customers do not mind paying more for a better experience, using personalization can empower businesses to invest in intuitive UI/UX that helps to yield better ROI.
    • By helping brands understand their customers better, personalization can significantly enhance the overall onboarding process and add a more “familiar” touch to it. This is especially useful while welcoming new customers.
    • As 58% of users prefer to buy from a website that offers personalized recommendations (on the basis of their previous purchases), personalization helps brands to perform cross-selling and upselling too.
  • Fostering healthy customer relationships
    Building healthy customer relationships play a crucial role in the success of a business, with weak relationships being one of the factors behind the average customer churn. It’s essential to listen to your customers and make them feel valued for nurturing a positive bond throughout their journey. To build an effective relationship with your clients, you need to know them and understand their ideas and feelings.Staying in continuous contact with your customers through surveys, emails, and marketing channels can help to dive deeper into their expectations and deliver what they actually need. By tapping into customer satisfaction levels, you’ll be able to take action immediately if there’s something going off track. This will help to tremendously increase the Customer Lifetime Value.Improving the quality of communications with your customer base and key contacts can efficiently bolster your relationship-building efforts. But you need to refrain from an avalanche of communications as it might turn off your customers. Finding a balance is essential to make conservations more productive.
  • Leveraging customer success software
    Being used by many fortune 500 brands, customer success software can help to reduce churn while helping businesses expand thoroughly. By seamlessly analyzing customer behavior and creating a score on the basis of the data, this software can help you prioritize existing customers and manage new customers with minimum effort. By gaining a 360-degree view of customers, you can effortlessly identify potential issues that can lead to client defection, inactivity, as well as profit crash.Due to its integration with CRM software and social media marketing tools, customer success software is the key to access necessary customer data in one place. This saves customer representatives from getting startled in meetings as they’re well equipped with the details about a particular customer in question (what are the customer’s concerns, when did they approach the support team, why they’re not continuing the subscription, etc.)
  • Sending out gift coupons and special offers
    There’s no doubt that customers love to get a deal from brands, no matter even if it’s just 10 percent off! While the customers take advantage of the discount coupon, it will still leave you with a healthy profit. Sending special offers is a great way of massively increasing your customer’s lifetime value. But the question is when to share a gift coupon or special offer with your customers? The ideal time to share a discount coupon is a few weeks (generally 2-3 weeks) after a product purchase by the customer. As the customer will be able to recollect the past transaction, he/she will be interested to return and review other products or services listed on your website. By giving lucrative offers on the purchase of two products, you can encourage customers to spend more and keep coming back to your site. This is a vital step to increase the customer lifetime value.
  • Promoting an annual billing cycle
    In case your brand sells a product or service with a recurring subscription, the time period for which customers keep buying it says a lot about your customer lifetime value. While customers that keep investing in your product for long drive measurable revenue, the not-so-frequent ones (that only pay for 1 or 2 months) generate NO revenue and fail to cover the acquisition costs too.Encouraging customers to adopt an annual billing cycle not only keeps them committed to a year of usage but also helps to improve your customer lifetime value. Moreover, using an annual billing lifecycle empowers you to forecast the total revenue that your brand is likely to generate in the future. This proves to be a boon for making future-forward decisions. In case users forget to renew their annual subscriptions, you can reach out to them via email, phone, or even surveys for preventing them from a dangerous chargeback surprise.Here are some of the advantages of switching to an annual billing cycle:
    • Low customer churn
    • Huge cash flow
    • Predictable revenue
    • Cost-effective
Customer Lifetime Value3
  • Making the most of a dunning management system 
    A solution dedicated to automatically retrying a failed payment and sending a drip of renewal notifications (every time a transaction gets declined from the customer’s credit or debit card), a dunning management system can help to alleviate the stress that customers experience during an invalid payment option. While the credit or debit card transactions can stop working for a number of reasons like expiry, loss of cards, expense policies, specified limits, etc., freezing a customer’s account can spoil their experience and increase churn too! Implementing dunning management makes it easy to enable automatic charge retries, so you don’t have to handle frustrated emails or calls from angry (upset) customers. By reducing interruptions in the revenue stream and simultaneously delighting your customers, a dunning management system helps you ensure a great customer lifetime value. 

  • Adopting a freemium model
    To increase your customer lifetime value, using a freemium model can prove to be a boon for your brand. Imagine Candy Crush making $1 billion in merely one year. Although users can play candy crush without spending a single penny, they need to pull out their wallets for purchasing extra lives or boosts in the game. The aim of this model is to persuade customers to try out the product, get smitten with it, and end up spending money on it.

    In case you cannot adopt a freemium model for your business, it’s best to offer different packages in terms of features and flexibility. By doing so, you can provide your customers with more choices and convince them to spend more on high-prized upgraded versions. 

Customer lifetime value lays the foundation of a successful business. It helps to improve customer retention, unveils the level of brand loyalty you own, and helps your business stay on top. Are you finding it challenging to increase your customer lifetime value? Get in touch with Voxco today!  

Create Omnichannel Surveys with Voxco

Voxco is trusted by Top 50 Market Research firms, Global Brands & Universities in 40 countries. Voxco offers full omnichannel capability including CATI, Predictive Dialler, Online surveys, offline CAPI, and Panel Management. Check out Voxco Offerings below: 

Voxco Online

Create engaging omnichannel online surveys with advanced skip patterns, multi-media files, automatic device detection and more. 

Read more about Voxco Online Survey Software

Voxco Analytics

Create one click summaries, visual dashboards, uncover key trends and easily share  the report with teams. 

Read more about Voxco Survey Analytics 

Voxco CATI

Maximize CATI ROI with advanced features, hosting options, seamless telephony integration, and flexible pricing. 

Read more on Voxco CATI survey software

Voxco IVR

Voxco IVR can be used as a standalone, self completion survey option or in combination with other data collection modes.

Read more about Voxco IVR Survey Software 

Read more