What is Customer Lifetime Value

Customer Lifetime Value one of the most important factors in determining your business’ present and future success. This can accurately predict how much your customers are really worth by measuring the net profit that you’ll take in over the course of your entire relationship with a customer. You’ll be able to narrow down exactly how valuable they are to your business.

It can also be defined as the dollar value of a customer relationship, based on the present value of the projected future cash flow from the customer relationship. Customer lifetime value is an important concept in that it encourages firms to shift their focus from quarterly profits to the long-term health of their customer relationships.

Rather than just racing to keep your head above water, you’ll be able to understand which customers you should be focusing on and, more importantly, "why" you should be focusing on them.

 

ROI Calculation

The increase in ROI has been linked to the growing size of email user base and market reach. 

Email marketing remains a growing go to the channel of online marketers in this digital era. 

For email to continue the success, marketers must consider how and why mobile use increase in message volume and frequency of data can impact the performance.

To determine the customer lifetime value you have to calculate the return on your investment (ROI). It can show you how much your investment has been effective. You can select and compare different strategies to see which one perform better.

What is the customer lifetime value of an email subscriber?

This is the same kind of metric as a customer lifetime value but you have to take the lifetime of the email subscription in order to measure the impact of the email program. So we’re looking for the total additional profits that email subscriptions represent.

 

Email subscriber lifetime value calculation

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The email lifetime value is more complicated than the ROI. It would be the most relevant if you can have the statistic of generated profits per subscriber to get more insights and analysis.

The data that allows you to calculate the email subscribers lifetime value is not easily accessible however there is a way to calculate this value.

You will need three things:
Email marketing profits generated
Active subscriber’s number
Subscriber’s average lifetime value

 

Email marketing profits generated

Search for your marketing effort profits in a period at least about 12 months. Exclude non-marketing revenue and use a CRM or financial systems to generate this calculation for you.

Look into your analytics and define what profits come from email marketing. You can use metrics such as assisted conversion or last clicks.

By determining the role of email marketing and the profits we can get the total profits generated via email. Separate revenue of profits and focus only on profits.

 

Active subscriber’s

Focus only active subscribers by excluding inactive subscribers. You need to know when your subscribers became inactive to determine what subscribers is active.

The inactive are all email addresses that have unsubscribed or bounce but also the subscribers that have stopped clicking or opening your email for a while. You can define the period to set the moment when your subscribers change active to inactive.

To get the email address lifetime average, look up the date when these people became inactive. For the active subscribers search for the time they’re in your database. With these 2 numbers, you will get an email address lifetime average.

 

Subscriber’s average lifetime value

To get an indication of how active subscriber will contribute in a year, divide the average of active subscribers by the email marketing profit.

After getting this profit in a year you can multiply it by the email address lifetime average in your database. You’ll get the number for your email marketing lifetime value.

 

Email marketing and customers lifetime value calculation

The email subscriber lifetime value can be more relevant but with the combination of ROI and lifetime value will help you to get a statistics to create strong indications in your email marketing strategy.

 

The Right Customers - The Right Business Value

Success isn’t about finding customers—it’s about finding the right customers. Getting oriented with how to calculate your customers lifetime value and ROI will draw a clearer picture of how you can craft email campaigns that would target and win over those customers that is right for you.

 

 

 

 

 

 

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