The Importance of Customer Lifetime Value - Whiteboard Wednesday

Localytics VP of Marketing, Bernd Leger explains the importance of understanding and tracking your Customer Lifetime Value, or CLV within your apps. CLV can help you understand your most valuable user segments and spend channels, based on customer value over time. Localytics offers an easy-to-understand, real-time, customizable CLV metric to help you get the most out of your marketing dollars.




Welcome, my name is Bernd Leger; I'm the VP of Marketing at Localytics. Thank you for joining us for another another Whiteboard Wedneday session.


Defining Customer Lifetime Value

Our topic is customer lifetime value, CLV, and we want to focus specifically on how you can drive CLV for your customers, within your apps. If you look at a traditional definition of CLV and you go to Wikipedia, you'll see something as complicated as this. What they're trying to say, is, for you to calculate CLV, you have to do a quite-complicated calculation of your net present value, you have to make a prediction into the future. So you can make CLV as complicated as you want it to be, or you can make CLV as simple as you want it to be.

CLV, in the most simple terms is, how much revenue are you driving with your customers? Obviously, a lot of organizations aren't even here yet. If you look the maturity of the mobile space, most organizations can't even calculate CLV for their customers today. So this is a great starting point in order for you to understand how much effort you're putting into your marketing spend, your cost of customer acquisition, and how does that contrast with the ultimate lifetime value of your customers.


Understanding How CLV Impacts your Marketing

For example, let's say you're selling widgets, and you sell 3 widgets per customer at $10 each, your customer lifetime value for that customer would be $30, and if you customer acquisition is $15, your profit is $15. That's a great customer to have, that's a customer you want to re-invest in, you want to drive more revenue through.

So what you want to do, is basically map out for your organization, what does your curve look like in regards to CLV, over time, for either your individual customers or for your customer segments, which is more likely.


Leveraging CLV to Optimize your Spending

You might find that one segment has a very fast acceleration of high-spenditure in the beginning, then it plateaus and flattens, whereas segment B might be a straight increase, where your customer segment just continues to increase more and more spend.

That's obviously great information to have because ultimately you want to have that secret sauce and understanding of what measures you take leads to a higher increase in spenditure.


Localytics can Craft your CLV Equation

We at Locaytics help give you the metrics and insight that will help you create that equation for your organization; we give you the foundation for that, and then you can tailor that specifically to your own organization. What that gives you is an understanding of metrics such as: "are my iOS users driving more CLV than my Android users? Are my ipad users more profitable than my smartphone users? You can dig as deep as you want.

Recommendation here is: leverage a granular, real-time analytics solution that helps you understand how you can drive CLV within your customer base.

With that, thank you very much for joining us. Again, my name is Bernd Leger at Localytics, and we look forward to seeing you very soon. Thank you.

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