Calculate CLV for customers
Simple CLV = Average Purchase Value × Purchase Frequency × Customer Lifespan. If customers spend ₹2000 per order, buy 4 times yearly, for 3 years: CLV = ₹2000 × 4 × 3 = ₹24,000.
A healthy CLV:CAC ratio is 3:1 or higher—customers should be worth at least 3x what you spend to acquire them. Below 1:1 means you're losing money on each customer.
Increase purchase frequency through loyalty programs, raise average order value through upselling/cross-selling, extend customer lifespan through excellent service, and reduce churn through engagement.
Yes, CLV varies significantly by segment. High-value customers might be 10x more valuable than average. Segmenting helps focus acquisition and retention efforts on the most profitable customers.
CLV sets your maximum acquisition cost. If CLV is ₹24,000 and target CLV:CAC is 3:1, you can spend up to ₹8,000 acquiring a customer. Higher CLV justifies higher marketing spend.
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