What is Customer Lifetime Value and how do you calculate it? This is probably one of the most fundamental questions that you need to ask yourself when you are considering customer master data management, without some sort of answer it is hard to justify the spend associated with an MDM solution because ultimately you should be able to calculate the return on investment (ROI) that you make in the CMDM solution.
Customer Lifetime Value, also known as CLV, is the monetary value of an overall customer relationship. The value is based on the present value of the projected cash flow related to the long-term customer relationship.
The calculator below gives you a sense of how to do a CLV calculation (not taking into account variations in retention rate, acquisition cost, revenue and margin). This calculator also doesn’t take into account inflation.
The important thing to remember with CLV is that you want to focus on the proto-typical customer, in other words, those customers that fall to the centre and to the right of a standard distribution curve. These are the types of customers you want to focus your energy on in all your promotion, marketing and service, and support campaign management.
With Pretectum’s CMDM you can calculate and pin the CLV estimate to the customer master and then use this to filter out the inactive and non-profitable customers.
