Introduction to Cuatomer Lifetime Value (CLV)

Agenda

Topic- A: Introduction to Big Data , Big Data Analytics

Topic- B: Customer Lifetime Value
Topic- A: Introduction to Big Data, Big Data Analytics
 What is data?

Data are individual units of information.

 
 Data is any set of characters that is
gathered and translated for some
purpose, usually analysis. It can be:
 Text, Video, Images, sound etc.
What exactly is big data?
Big Data is also data but with a huge size.  It is a collection of large and
complex, data sets that are difficult to store and process using traditional
database management such as Relational Database management
System(RDBMS). Usually, Big Data reside in cloud

Then How big it would be?

An example of big data might be
petabytes (1,024 terabytes) or exabytes
(1,024 petabytes) of data consisting of
billions to trillions of records of millions of
people—all from different sources
(E.g,Web, sales, customer contact
center, social media, mobile data and so
on).
Big data analytics
What it is?
 Big data analytics examines
large amounts of data to
uncover hidden patterns,
correlations and other
insights.
 It is a form of advanced
analytics, which involves
complex applications with
elements such as predictive
models, statistical algorithms,
AI, ML and what-if analysis
powered by high-performance
analytics systems.
 Big data analytics
Why is it Important?

 Because it can PREDICT, PREPARE AND PREVENT

 Helps in Disaster/Crisis Situations -Mining information (Data Mining)

from previous disasters, officials and responders can collect insights
that help forecast future incidents.

 Knowing, for example, that a particular area has been flooded, and
by how much, provides highly useful benchmarks for mapping out
flood-prone zones and planning for where to store key rescue
resources nearby—beyond the reach of typical inundation.
 Big data analytics
Why is it Important?

Google is using AI to predict floods in India and warn users. The service is part of the global
Google Public Alerts program. As part of a partnership with the Central Water Commission of
India, Google will now alert users in the country about impending floods. The service is only
currently available in the Patna region, India with the first alert went out sometime in
September 2015.
 Big data analytics
Why is it Important?  It Can help HR

What is the impact of

How to predict skill
learning and
set demands?
Which of our development
employees are most initiatives on
likely to leave within employee
the year? performance?
Types of Big Data Analytics
Types of Big Data Analytics
Topic- B: Customer Life Time Value
 Introduction to Customer Life Time Value

References:
https://exponea.com/blog/customer-lifetime-value-guide/ - ”
What’s customer lifetime value – All you need to know (The ultimate 2020 guide)

https://www.crazyegg.com/blog/customer-lifetime-value/ -”The importance of Customer

lifetime value and how to calculate it”

https://enterprisemonkey.com.au/tools/free-customer-lifetime-value-calculator/-
“ Free Customer Lifetime value calculator”

https://www.webfx.com/tools/clv-calculator/ - “Customer Lifetime value calculator”

 What is Customer Lifetime Value?

 Customer Lifetime value represents a value of a customer to a company over

a period.
 It is also been called LTV(Lifetime value of a customer), CLTV(Customer
Lifetime Value)
 Customer lifetime value (or life-time value (LTV), is the average amount of
money your customers will spend on your business over the entire life of your
relationship.
 What is Customer Lifetime Value?

 For instance, if a customer continues to buy products or services from your

business for 5 years and spends $6 per year, his or her customer lifetime
value is $30, minus any money you spent to acquire that customer.

Assume that the, you spend $2 to attract the customer (customer acquisition
cost),
then the customer lifetime value = $30-$2
=$28
 Why CLV is Important?

 CLV to understand the customers well.

For example, it can help in determining
purchasing behavior, priorities, needs,
loyalty, satisfaction level etc.

 Helps to develop product/service

recommendation
 Helps in Digital Marketing

 Helps in customer segmentation –

Potential buyers, Best Customers,
Almost lost Customers etc.
 Why CLV is Important?

 Helps to reduce Churn Rate (the

customer stops doing business with the
company)

 Helps in customer retention, otherwise

called retaining the customers

 Improves Customer Acquisition

 KPI’s of CLV

 Average Order Value

(AOV)

 Purchase Frequency
(F)

 Gross Margin (GM)

 Churn Rate (CR)

AOV ( Average Order Value ) Calculation
Purchase Frequency Calculation
 Gross Margin Calculation

GM = Total Sales Revenue – Cost of Goods Sold (COGS) / Total Sales Revenue (express

the result as a percentage).
 Churn Rate and Customer Lifetime Period

Churn Rate = 100 – ((100/#unique customers) * #customers willing to buy again))

Customer Lifetime Period = 1/Churn Rate

Customer Lifetime Value Calculation
Activity Time

Open onlineretail-question.xlsx file.

Required data and questions for this activity can be found there