How to Measure Customer Lifetime
Determine Your Average Order Value:
Stan by finding the value of the average
+ Calculate the Average Number of
sale.If you have not been tracking this
data for long. consider tooking at a one-
or three-month period asa proxy for
the full year.
Value
Transactions Per Period: Do customers
+ Measure Your Customer Retention:
l=inally,you'lI need to figure out how long
come In several times a week, which might the average customer sticks with your
becommon with a coffee shop. or only brand. Some brands, like technology and
once every few years,which could be the car brands, inspire lifelong loyalty.
caseat a car dealership?The frequency of Others. like gas stations or retail chains,
VISitsis a major dnver of CLV. may have much less loyal customers.
Calculate Customer Lifetime Value:
Now you have the inputs. It's lime to
multiply the three numbers together to
calculate CLVper the formula below.