What Is Customer Lifetime Value & Why Is It Important?

As a business owner, you might be tracking multiple metrics to identify what is and isn’t working for your business. However, among all metrics, one special metric that can tell you the value a customer brings to your business is “Customer Lifetime Value (CLV).” Understanding CLV can help you identify and target your most valuable customers, predict future revenue and make informed marketing & investing decisions.

In this blog, let’s find out what Customer Lifetime Value is, how to calculate it, its importance, and some effective strategies to improve customer lifetime value.

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What Is Customer Lifetime Value (CLV)?

Why is customer lifetime value important

According to Gartner, Customer Lifetime Value is defined as – 

“The total revenue or value of a customer relationship over a lifetime”

In simple terms, Customer Lifetime Value or CLV measures the total value a customer will bring to your business over the entire duration of their relationship (with your business). CLV is a critical metric to measure because it will help you predict future revenue and long term business success. 

For example, knowing the lifetime value of a customer helps you get answers to these questions: 

  1. How much should you spend on sales and marketing?
  2. What revenue and profits can you predict in the future?
  3. How can you optimize customer acquisition cost for maximum value? 
  4. How much money should you spend on customer acquisition? 

In other words, once you have a fair idea about CLV, you can make much more informed decisions about resource allocation and optimization of your sales and marketing efforts.

How To Calculate Customer Lifetime Value?

Before we dive into the formula of Customer Lifetime Value, you must know about the two models to measure the value of your customers. They are:

  1. Historical Model: This model uses historical data to estimate the value of your customer over their lifetime. It is calculated based on past spending patterns, retention rates, and other factors that have been observed for the customer.
  1. Predictive Model: This model applies regression and machine learning techniques on new and existing customer data to predict future customer behavior. This technique helps in forecasting the future lifetime value of the customer. 
How To Calculate Customer Lifetime Value

Customer lifetime value formula

The Customer Lifetime Value can be calculated by multiplying the Customer Value by the Customer Lifespan.

Customer Lifetime Value = Customer Value X Average Customer Lifespan

Let’s break down the customer lifetime value formula,

Customer value 

Here, Customer Value is the revenue that a customer is expected to generate throughout their relationship with your business. We can calculate customer value by multiplying the Average Purchase Value and the Average Purchase Frequency Rate.

Customer Value = Average Purchase Value (APV) X Average Purchase Frequency Rate (APFR)

Average purchase value 

Further, you can calculate Average Purchase Value by dividing the total revenue of your company in a particular period (usually a year) by the number of orders in the same period. 

Average Purchase Value = Total Revenue/Total Number of Orders

Average purchase frequency rate

The average Purchase Frequency Rate can be obtained by dividing the number of purchases by the number of unique customers during that period.

Average Purchase Frequency Rate = Number of Purchases/Number of Customers

Average customer lifespan

In the customer lifetime value formula, Average Customer Lifespan is the length of time that a customer is expected to remain with a business. You can calculate this number by averaging the number of years a customer keeps buying from your company. 

Average Customer Lifespan = Sum of Customer Lifespan / Number of Customers 

Customer Lifetime Value Example 

Let us consider a simple example to explain the above customer lifetime value. Imagine you own an eCommerce clothing store.

  • Your customer spends INR 1000 per visit on average (this is the Average Purchase Value).
  • He visits your store approximately two times a month (this is the Average Purchase Frequency Rate).
  • So the Customer Value is around INR 2000. 
  • On average, your customer stays with your business for around four years (this is your Customer Lifespan.)
  • Using the above formula, the Customer Lifetime Value for this consumer will be INR 2000 x 12 months x 4 years = INR 96000.

Why Is Customer Lifetime Value important?

It helps you optimize your marketing spend

The whole point of calculating the CLV is to optimize your sales and marketing spend. When you understand your CLV, you will be able to focus your efforts on acquiring and retaining the most valuable customers of your business instead of wasting it on customers with a lower value. You will be able to optimize your budget so that you get the most out of your efforts, which, in turn, will improve your bottom line.

It creates a steady cash flow for your business

A steady cash flow is crucial for your business as it ensures you have the resources to meet your company’s financial obligations as they come due. You need a steady cash flow to pay bills, make payroll, and invest in new opportunities. With the help of CLV, you can identify your repeat customers who will continuously pump cash into your business, resulting in a steady cash flow. You can attract customers with better offers and more personalized experiences so that they continue to purchase from you.

It helps you make better decisions about pricing and promotions

The price you set for products and the promotions you run can significantly impact your profitability and competitiveness. When you understand the CLV of different products and categories, you can make better decisions about product pricing and promotions. For example, if the CLV of a particular product is high, you can charge a higher price, not run any promotions, and still sell.

Increasing CLV can help reduce customer acquisition costs (CAC) and churn rate 

When your CLV is high, your customers are more likely to remain loyal to your business. This not only translates to a lower churn rate but also means you need to spend less money on acquiring new customers to replace the existing ones. Also, higher CLV customers are more likely to bring more new customers through word of mouth, which can further help reduce CAC. A higher CLV customer may also be less sensitive to pricing. This means there will be minimal impact on the churn rate when you decide to increase the prices or make some other changes.

CLV helps identify areas of improvement

CLV is a valuable tool for identifying areas of improvement in your business. Different values and trends in CLV can highlight various issues in your business. For example, 

  • Low CLV indicates that your business is not retaining customers or you are targeting low-value customers. 
  • Declining CLV indicates that your business is slowly falling prey to rising competition, changing customer preferences, or even declining product quality or customer service. 
  • Uneven CLV indicates that some segments of your target audience are less valuable than others. Which means you are not effectively targeting and serving your most valuable customers. 

Long story short, by analyzing your CLV, you can identify different areas of improvement in your business and take necessary steps, like changing customer acquisition and retention strategies or adjusting product offerings, to solve them.

How To Improve Customer Lifetime Value?

Here are 5 simple hacks to improve the CLV of your business – 

Create a great onboarding process

Customer onboarding is the process of introducing a new customer to your business (and your products) and helping them become familiar with it. The goal of customer onboarding is to ensure that the customers can get the most out of your brand by understanding what your brand does, why it matters, and why they should stick around with your business. A smooth onboarding customer experience will increase their likelihood of becoming long-term and loyal customers.

Why does this work?

By creating a great onboarding process, you make your customers feel welcome, supported, and valued. It will directly impact customer satisfaction, which, in turn, will result in a higher CLV.

Craft a loyalty program and reward your customers

A loyalty program is a rewards program that incentivizes customers to continue doing business with your brand. The goal of a loyalty program is to build customer loyalty and encourage customers to make repeat purchases by rewarding them for their patronage. Here is an example how Super Hair Pieces are using reward program pop-up on their website to incentivize repeat customers and referrals, 

brand using customer loyalty program to boost CLV

 Credit: Super Hair Pieces

A well-designed loyalty program can provide customers with a reason to spend more money with your brand than your competitors, as they can unlock rewards and special offers that they can’t find anywhere else. 

Why does this work?

A loyalty program increases customer spending, bolsters customer retention, and enhances customer loyalty, all of which are key ingredients to improve customer lifetime value. A loyalty program also offers valuable data about customer behavior, which can be used to tailor your marketing efforts and improve the overall customer experience. This, again, will have a positive impact on the CLV.

Amp up your customer service

Enhancing your customer service can make the customers feel that their needs are being met and their concerns are being addressed, that too in a timely and satisfactory manner. This will encourage them to continue doing business with your company. In other words, it can result in repeat purchases and a longer customer lifetime. Good customer service also helps in reducing customer churn, as a satisfied customer is less likely to switch to a competitor. You can improve your customer service by offering personalized services, omnichannel support, and a seamless return or refund policy.

Why does this work?

Good customer service can make the customers feel valued by your brand. It clearly communicates that customers are more important to you than sales. This results in more repeat purchases and, finally, better CLV.

Encourage cross-selling and up-selling.

Upselling and cross-selling are extremely important for any business because they can help increase the Average Transaction Value (ATV) and the revenue. In addition, cross-selling and upselling also improve the customer’s perception of your business. For example, if a customer buys a pair of shoes from your online store, you can also recommend a pair of socks to go with the shoes, improving the customer’s overall experience with your store.

Why does this work?

When you carefully select and recommend products that are relevant to the customer’s needs and interests, you can build trust. As a result, it improves the customer retention rate and results in a longer customer lifetime.

Keep engaging your customers through email marketing

By sending targeted emails to your customers, you can stay on top of their minds and encourage repeat purchases. For instance, you can send personalized emails with special offers or recommendations based on the customer’s past purchases. This can help increase the overall value of that customer’s relationship with your business.

Why does this work?

By regularly sending emails that are relevant and personalized, you can bring your customers back to restock supplies, check out new products and offers leading to better CLV. 


Customer Lifetime Value (CLV) is a key metric to understand and optimize for any business. By calculating the expected value of a customer over their lifetime, you can identify the most valuable customers for your business and focus your efforts on retaining and maximizing the value of these customers. Thereby, building a profitable and successful business. 

But we understand improving CLV takes a lot of time and effort and might not be possible for all due to limited resources. And that’s where we come in. 

We have worked with more than 200+ brands helping them achieve long-term sustainability by improving the Customer Lifetime Value. To know more about how we can help you improve CLV, book a free consulting session with us today!

About ANS Commerce 

A FlipKart group company, ANS Commerce, is India’s #1 Full Stack E-commerce Enabler trusted by 200+ Brands! 

From creating your online store, running profitable performance marketing campaigns, managing marketplaces to order fulfillment & warehousing – we do it all to supercharge your brand’s growth!

How To Plan The Best Strategy For Social Media Marketing?

Social sites today have changed how society functions; the interaction, the connection, even the behavior of people have changed. With the growing popularity of social platforms like Facebook, Twitter, and LinkedIn, businesses realized that these websites can influence customer behavior and took the opportunity to reach out to them with their products and services.

Many companies became successful with it as it allowed them to contact millions of people and spread the word about their product in a breeze. However, not all businesses achieve that success. Do you know why?

Social media is continuously growing! New platforms are emerging with different features, and the old ones are getting updated in order to keep their visitors engaged. So, no fixed strategy works. It needs to vary depending on which social networks your target audience uses. Before we discuss that, let’s understand what it is and what it can do for your business.

What is Social Media Marketing?

The process of building a community on social media platforms with the target audience to generate traffic to your business is known as Social Media Marketing (SMM). It is an overall method to communicate with existing consumers and reach out to new ones on the platforms where they socially interact.

Businesses use social media marketing to promote their brand, culture, mission, and even tone. There are a variety of methods on social media networks that allow marketers to advertise their products/services, connect with their users, and interact for the purchase.

Importance of Social Media Marketing

With social media playing such a crucial part at the top of the funnel, it is important to generate a fantastic marketing opportunity. And if you’re not making use of this lucrative source, you’re missing out on its great benefits.

Some benefits of Social Media Marketing are-

Increases Brand Visibility

Having a social media presence for your brand can undoubtedly increase your company’s visibility as it allows you to reach the same level where your customers are, and create a community where your users can interact. Social networking is the most stress-free and profitable digital marketing tool that can quickly generate a large following for your company and boost your brand recognition within a limited period of time.

Improves Brand Loyalty

Communicating with customers on a regular basis and creating a bond with them increases customer retention and loyalty that every business requires. When you have social media presence your customer can easily locate you and connect with you, moreover, you can also engage with your customers and keep them happy increasing brand loyalty.

Helps Remain Budget-Friendly

Social media marketing is perhaps the most cost-effective technique as almost all social networking sites provide free registration and account creation. However, if you decide to employ paid social media advertising, start modestly to have a sense of what to expect. Being cost-effective is critical since it helps you to maximize your return on investment and dedicate more money to other marketing and business needs.

Enhances Customer Satisfaction

When customers post comments on your page, they like to receive a customized answer rather than a generic statement. A firm that appreciates its clients and takes the time to craft a personalized statement is naturally regarded as positive. With the use of these platforms, you can give your company a voice that will help you build your brand image.

Boosts Web Traffic

Another advantage of social media is that it aids in the growth of your website’s traffic. If you post your content on social media, users will be more inclined to visit your website. The more high-quality content you share on social media, the more inbound traffic you’ll receive and the higher your conversion chances will be.

How to Create a Social Media Marketing Strategy?

Social Media Marketing Process includes simple steps:

Define goals

It is important to clearly outline what you want to achieve from social media platforms. Whether you want to increase the followers or enhance sales of your company. Determine the purpose of your company’s social media presence in the first place. Without a clear goal in sight, you won’t be able to choose the best course of action.

Prefer using the S.M.A.R.T. goal framework to create your objectives

Specific- For your goal to be more effective, it is important to be specific. The more specific your goals are, the easier it will be to develop a strategy and set standards. If you want to raise brand recognition or gain followers every month, be explicit about how you’ll accomplish it.

Measurable- Specificity is a good start, but quantifying your objectives makes it easier to follow your progress and determine when you’ve arrived at your destination. You may enhance your results by tweaking your method if you are not able to achieve your goal.

Attainable- This is the moment in the process where you should do a serious self-evaluation. Companies might become too ambitious and establish unreasonable, unreachable objectives. Check to see if your aim is feasible given your resources.

Quick Tip – Reflect on whether your goal is something your team can fairly achieve or is certain to fail. Remember that your goal holds the efforts and the confidence of your whole team. If your goal fails, the confidence of your team also fails.

Relevant- Relevant goals are tightly tied with a company’s aims. This is when you must consider the larger picture. Why are you aiming for this particular goal? What influence will it have on your bottom line?

Time-bound- Set your deadlines! You and your team must discuss the time frame and agree on when a target has been met in order to accurately assess success. Discussing when the team should begin and execute can further make your goal more effective and memorable.

Set different goals for each social media platform you are using and keep a track of your progress to check the difference.

Determine audience

A target audience is a set of individuals who are most likely to be interested in your company. They’d have similar demographics and habits.

Remember, assumptions are bad for marketers! So don’t be afraid while researching your target audience. It will allow you to go deeper into the details and produce more relevant posts. Most of the information you need to shape your social media marketing plan is already available. It’s only a matter of knowing where to look.

With the right technologies, marketers can quickly research their target demographic. There’s no need for professional market research or data science expertise.

Choose Platform

We already discussed the increasing periphery of social media and distinct features that the platforms own. You can’t just incorporate every social media network in your approach because there are hundreds of them. It’s critical to perform some research before deciding on the best platforms for your marketing plan. Approach the ones that are most relevant for your brand and help you reach a large audience.  

You also need to understand that a distinct collection of users interact in distinct ways on different platforms. So, you cannot post the same material across all platforms as your audience won’t like it.

Here are some pointers on how to pick the best social media platform:

Facebook- Facebook has almost 2.7 billion users that love to develop relationships and stay in touch with old friends. As a result, Facebook is an excellent medium for increasing client loyalty but for attracting a new audience it has an enormous user base, and you might need to go for ads to make your posts reach a large number of people.

Consider your company goals when you evaluate Facebook as a possible platform.

Learn Facebook Ad Targeting Tips to Drive Conversions for Your Business.

Twitter- Twitter is a wonderful tool for increasing brand recognition. A hashtag is a tool used by Twitter to arrange conversations around a word or phrase. You may discover what others are talking about by Googling hashtags and tailoring your tweets to join in on the topic.

Many companies mix Twitter with offline interaction, such as events, because Twitter is frequently used to offer real-time information to an audience.

LinkedIn- LinkedIn has the distinction of being the most popular platform among citizens between the ages of 30 and 49. LinkedIn is also distinct in that it has a specific emphasis on educated users. LinkedIn is used to look for employment and network professionally. As a result, the platform is beneficial for generating B2B leads, general networking, and personnel recruitment.

LinkedIn serves as a hub for in-depth, industry-specific material that is more niche than what you’ll find on Facebook or Twitter.

Pinterest- Pinterest is a social media platform for “scrapbooking,” or preserving material by “pinning” photographs or videos to a virtual bulletin board. The Pinterest demographic is dominated by women. Recipes, styling suggestions, breathtaking images, and DIY projects are among the most popular pins. You’ll need good images to captivate consumers on Pinterest because it’s a visual site. Strong retail sales have been connected to successful company usage of Pinterest.

Instagram- Instagram is one of the most popular social media networks, especially among millennials and Gen Z. Instagram, like Pinterest, depends on photographs or videos to generate interaction. As a result, this platform is ideal for enterprises that are visual in nature, such as art, cuisine, retail, and beauty. There is less noise than on Facebook because it is a growing platform. As your reach is broader, the platform is excellent for generating leads.

Create Content

It is no surprise that we are already aware of the importance of content. Content is the core of any social media marketing plan. Based on your goals, audience, and brand identity, you should have a very clear sense of what to post at which stage.

Here are some suggestions and ideas to get you started-

Conduct keyword research- While keyword research and analysis are essential for advertising success, doing keyword research on social media may substantially boost your exposure.

Post in the form of Stories- Stories aren’t going away anytime soon. Story-style content is both participatory and can’t-miss. An appealing story can help your brand’s account “jump the line” and stay in the mind of your followers.

Engage with conversation- Ask questions, give answers! Drop the statements that can initiate conversation. Show more of your human side as people love interacting rather than getting instructions.  

Quick Tip – You can conduct a competitive analysis to check what your competitors are up to.

Advertise Posts

It’s difficult to get your work seen on the internet, especially on social media, where nearly half of all information is shared with no one.

Post your content on the right platform at the right time to reach your target audience. Customers are not available on all platforms at all times. You need to check the density of the visitors on the specific platform and post the content during that same time so that it reaches the maximum viewers.

Moreover, follow the 80/20 rule to get the most out of your social media: “spend 20% of your effort developing content and the balance (80%) advertising it.”

Measure Progress

Your social media marketing plan is crucial to your overall marketing strategy. It’s difficult to get everything properly the first time.

As you begin to implement your plan and track results, you may discover that some of your approaches aren’t as effective as you had hoped. Keep track of your performance and compare it to entail your top-performing material.

Adjust your Approach

By this point, you should have a clear vision of your social media approach. However, you must be able to change your plan as the year progresses. There’s no doubt that a lot of social media is a learning process. Real-time monitoring can help you to make incremental adjustments to your social media marketing plan.

ANS Commerce Enabled Services

We are a team of experts that have years of experience in a variety of industries and brands with varied sizes and complexity. We are well aware of the kind of assistance you require when landing on social media platforms. Whether it is to increase brand visibility, ROAS, or retarget users based on their interests. We take care of every platform from the start to the end and influence customer behaviour to make impulse purchases.

Our services include Performance Marketing, Marketplace Management, Warehouse & Fulfillment, and e-commerce advice to help you get relieved of your marketing stress. We handle everything social media marketing- tools and target. So, get a DEMO and improve your internet presence now!

7 Customer Retention Strategies to Boost your Sales More Than Ever!

Customers are one of the biggest assets of any business. In a nutshell, any entrepreneur’s strategic planning starts and ends with building long-term relationships with customers. 

There are two facets to bonding with your customers – lead generation and customer retention. While the former welcomes new customers, the latter takes care of the existing ones. Now the question is, would you rather welcome only new customers and avoid the older ones, or would like to keep a balance between the two? 

“Marketers around the world put so much emphasis on nurturing new leads, they sometimes fail to entice the existing users.” 

It’s important to invite new faces, but at what cost? Also, it has always been easier to hold on to the existing customers because they are aware of your services and offerings. Approaching them takes less time than it takes to attract new ones. But how can you keep your existing users engaged? 

To help you maintain your loyal assets, we have come up with 7 customer retention strategies So let’s start, shall we?

7 Proven Customer Retention Strategies

1. Surprise your customers with great service

People love it when you take a step forward and value them. You can get creative in your customer support services and offer them valuable services without their knowledge, pulling off their attention. You can add thoughtful quotes with personalized messages, thanking them to buy from you. Additionally, you can give them special offers and discounts occasionally, conveying they are important for your business. 

Quick tip: You can come up with creative discount codes specially made for an existing customer base, grabbing their attention. For example, coupon codes such as JUST4YOU, and WELCOME_BACK, can grab their attention immediately. 

2. Get your customer’s feedback 

The market forces are no more driven by your products, but they rather revolve around customers’ needs and preferences. In simpler words, it’s not about your products and their features. It’s about the people you cater to. Their likes and dislikes play a major role especially when you roll out a new product in the market. And it’s impossible to satisfy every customer without knowing their taste. With customer feedback, not only do you get to know your strengths and weaknesses but you also make them feel noticeable and valuable. 

Quick tip: There are many ways to gather customer feedback. One such way is to do customer surveys. Come up with short, simple, and open-ended questions.

3. Send regular updates via email automation 

Newsletters are the best way to engage your customers in your brand. It’s one of the most cost-effective ways to retain customers. You can start with drip campaigns to nurture your customers with occasional updates. From time-sensitive offers to the new collection, to seasonal sales, cover each and every occasion to hit mail! To make it persuasive and attractive, use quirky content marketing strategies, grabbing the attention. 

4. Start with cause marketing programs

Consumers love to engage with those brands that support a social cause. By launching corporate social responsibility campaigns, you can grab the attention of your users. It’s the best way to retain your customers as cause marketing makes your organization look more credible and reliable. Check your brand’s mission statement and find what you as an organization genuinely care about. Share it with your community. It creates a sense of trust in the minds of the user, persuading them to swear by your products.

5. Use the strategy of gamification

Focused on the mechanism of gaming, this strategy is not your regular game. It’s more of a marketing tool to pull off the customer’s attention. Rewarding your customers when they refer your app to their friends, is one of the examples of gamification. You can even create customer-oriented campaigns using gamification. For example, create a contest asking your users to refer your business to ten friends. If five of their friends purchase using their code, they will get a free product. 

Quick tip: With more than 50+ third-party integrations, Kartify – our tech brandstore is pre-integrated with various loyalty programs. Get your hands on it and explore what’s best for your customer. Request your free DEMO now! 

6. Organize live educational webinars to motivate your customers

Webinars are a great way to educate your customers. You can organize a webinar, revolving around an area of your business. This way you can educate your customers and ask them to purchase from you. For example: If you are an e-commerce fashion brand. You can organize a webinar, highlighting fashion branding tips. This way you can introduce your new offers and products while giving them a glimpse of how you market your brand.

Want To Drive Traffic to your e-commerce website? Click here to read 10 concrete ways to boost your website’s traffic! 

7. Prepare a communication calendar

By creating a communication calendar, you get an idea of how often you interact with your customers. Even when you don’t get the answer to the feedback form, it’s your responsibility to reach out to them time and again. A communication calendar is similar to your editorial calendar. The only difference is, it tells the last time you communicated with your customers. 

Quick tip: By using a communication calendar, you can check if a customer’s subscription is about to get expired. You can reach out to them before it gets expired. This helps in retaining the existing customers. 

How to do it all?

From maintaining your brandstore with our in-house tech “Kartify” to assisting you with our performance marketing services, ANS Commerce is a full-stack e-commerce enabler. We strive at strategies that help you tackle all the obstacles including e-commerce marketing and brandstore hygiene. You can reduce your cart abandonment rate with our exclusive services. Request a demo for our e-commerce solutions now! Request your free DEMO now! 

Customer retaining campaigns cost 10X less than lead generation campaigns. These strategies are indeed very important to be included in your marketing efforts. Start with the above 7 strategies to enjoy long-lasting benefits.