Institute: University School of Business

Department: AIT-MBA
Subject: Marketing Research and Analytics
Faculty Name : Nancy Jyani
(Assistant Professor)
Email: nancy.e14746@cumail.in

Unit 1:Market Research Analysis

LECTURE 3:Customer Analysis

DISCOVER . LEARN . EMPOWER

Introduction
• Welcome to the session on Lifetime Value, Acquisition and Retention
Costs and Rates in marketing research and analysis.
• These concepts are fundamental in understanding customer behavior and
making strategic marketing decisions.
• Today, we will explore the importance of customer lifetime value and how
acquisition and retention costs and rates impact business profitability.
Customer Lifetime Value (CLV)
• Customer Lifetime Value (CLV) represents the predicted net profit a
company can expect to earn from a customer throughout their entire
relationship with the brand.
• CLV helps in assessing the long-term value of customers and guiding
marketing strategies.
• It considers factors such as purchase frequency, average order value, and
customer retention rates.
Importance of Customer Lifetime Value
• Customer Lifetime Value offers several benefits in marketing research and
analysis:
• Strategic Decision-making: Helps allocate resources effectively, prioritize
marketing investments, and target high-value customers.
• Customer Segmentation: Allows for the identification of profitable
customer segments and tailoring marketing efforts accordingly.
• Customer Retention: Guides strategies to retain valuable customers,
reduce churn, and increase customer loyalty.
• Acquisition Cost Optimization: Provides insights into the acceptable cost
of acquiring customers based on their potential lifetime value.
 Calculation of Customer Lifetime Value
CLV = (Average Purchase Value x Purchase Frequency) x Customer Lifespan

Average Purchase Value refers to the average amount of money spent by a customer on
each transaction. Calculate the average purchase value by dividing the total revenue
generated by the number of purchases made by customers.
Purchase Frequency indicates how often customers make purchases within a specific
timeframe. Calculate the purchase frequency by dividing the total number of purchases
made by customers by the total number of customers.
Customer Lifespan represents the duration of the relationship between the customer and
the brand. It is calculated by determining the average length of time customers remain
active or make repeat purchases.
Limitations and Considerations
• CLV calculations rely on assumptions and historical data, which may not
accurately predict future customer behavior.
• External factors such as market conditions and competitive landscape can
impact customer behavior and CLV.
• Different industries and business models may require modifications to the
formula and approach for calculating CLV.
Retention Cost
Retention Cost is the investment required to retain existing customers and
foster customer loyalty.
It includes activities such as customer support, loyalty programs,
personalized offers, and relationship management.
Acquisition Rate
• Acquisition Rate represents the number of new customers acquired within
a specific time period.
• It helps in measuring the effectiveness of marketing campaigns, lead
generation efforts, and customer acquisition strategies.
Retention Rate
Retention Rate measures the percentage of customers who continue to
make repeat purchases or remain active over a specific period.
It indicates the strength of customer loyalty, satisfaction levels, and the
effectiveness of retention strategies.
Importance of Acquisition and Retention Costs and
Rates
• Acquisition and Retention Costs and Rates are crucial for marketing
research and analysis:
• Cost Efficiency: Assessing acquisition and retention costs helps optimize
marketing budgets and improve cost-effectiveness.
• ROI Measurement: Tracking acquisition and retention rates helps
measure the return on marketing investments.
• Strategy Evaluation: Comparing acquisition and retention rates allows for
the evaluation of different strategies and their impact on customer growth
and loyalty.
• Customer Value Optimization: Balancing acquisition and retention costs
ensures that customer lifetime value is maximized.
Best Practices
• Data-driven Approach: Collect and analyze customer data to calculate
CLV and track acquisition/retention metrics.
• Customer Segmentation: Segment customers based on their CLV and
tailor marketing efforts accordingly.
• Continuous Monitoring: Regularly track acquisition and retention rates to
identify trends, make data-driven decisions, and refine strategies.
• Experimentation and Optimization: Continuously test and optimize
acquisition and retention strategies to improve performance and maximize
customer lifetime value.