Customer Lifetime Value

Customer Lifetime Value (CLV) is not a new concept. Although it is relevant to and should be in fact the core objective of daily activities, it is seldom mentioned and applied in the world of sales and marketing.

It is always like this. When nobody mentions about it, it's always being ignored. Then one day when somebody starts to pay attention to the subject, everyone immediatley wants to know more about it, even if it is irrelevant to his or her well-being. The subject suddenly becomes rich and famous! That's human nature, and it is indeed a sad part of life.

CLV is the total value of a customer spanning the entire period of the relationship with the enterprise. It is the potential contribution of that customer to the enterprise throughout the customer's lifetime.

Every sales rep should have an objective. It is not about "c"ultivating more customers. It is not about "a"cquiring market share from competitors. It is not about "r"etaining customers by providing excellent services. It is also not about "e"xpanding the share of wallet of the customers. It is to maximize CLV within the shortest period of time by offering positive touchpoint experience consistently, in terms of PID, or People, Information, and Deliverables. The CARE strategy mentioned above is only used to achieve this single core objective.

CLV is also related to customer profitability. In simple terms, profit is revenue minus cost. Revenue equals price times quantity. Quantity represents each individual product sold to the customer, meaning that quantity is composed of two variables: product and customer.

In order to maximize CLV mathematically, the enterprise should really...
01) Increase the frequency of the product sold through repeat selling
02) Increase the number of customer through acquistion and retention
03) Increase the revenue from customer through cross-selling and up-selling
04) Decrease the cost of serving the customer through process improvement