Customer Lifetime Value (CLV) is the dollar amount that represents a customer’s worth to your business from first transaction to last. 

CLV Calculation = Revenue x Gross Margin x Average Number of Repeat Purchases  

CLV is a powerful metric because even small increases in CLV can lead to huge gains in overall revenue.

For example, get 1,000 of your customers, who pay you $50 per month, to stay with you for a year instead of 10 months, and your annual revenue grows from $500,000 to $600,000. 

But the benefit is not only incremental. First of all, customer profitability tends to increase over the life of a retained customer. Second, on average, it costs ten times less to sell to customers with whom you currently have a relationship. After all, you’ve already attracted and educated them. 

While customer acquisition will always be a driver for businesses, research has shown that customer retention is a faster route to revenue growth than customer acquisition. Increasing customer retention by just five percent can lead to an increase in profits of 25 to 95 percent.

Brands have learned that the following key factors contribute to customer retention:

Build relationships with customers through shared values that foster loyalty. Use social media sites to connect, like Facebook and Twitter.  Through expertise and education, become the customers’ trusted advisor.  Track customer satisfaction. Consider using a Net Promoter Score (NPS) survey that primarily asks your customers whether they would recommend you to someone else.  Make great Customer Care the norm. To go above and beyond, surprise your customers with small customer appreciation gifts, handwritten notes or even a personal email to say thanks. 

Re-Emphasize Your Value:

It’s reinforcing to know you’re getting the best bang for your buck. 

Connect with customers through the channels they prefer.  Optimize your onboarding. Give customers simple and clear instructions for product usage.  Make it easy to reach you—a button on every Web page, for example. 

Take a proactive approach to Customer Care to eliminate problems before they occur.  Set customer expectations early and a little lower than you can provide to eliminate uncertainty about the level of your service and to ensure you always deliver on your promises.  Go the extra mile.  Personalize communications to strengthen the bond with your brand.  Empathize with your customers and understand their pain points. They’ll appreciate and remember the respect you’ve given them.  Ensure that your team members are empowered to resolve issues quickly.  Be authentic and sincere when addressing customer concerns.