Using customer lifetime values for fun and profit

While you have to be careful averaging customer lifetime values (CLTV), they can be very useful when you keep them associated with the individual customer.

Knowing how much each customer has spent is a great way of segmenting. Customers who spend a lot will tend to share behavior, while same as customers who spend very little also share (different) behavior.

RFM analysis uses this information as part of the Monetary factor which Repeat Customer Insights segments into 5 equal-sized groups (e.g. 5’s are the most, 1’s are the lowest).

There are dozens of ideas to use CLTV-based segmenting in your marketing.

  • VIP offers
  • Priority customer service, dedicated reps
  • Free products
  • Early-access and product betas
  • Order size/quantity discounts (e.g. free shipping above $X)
  • Look-alike or suppression lists for advertising

Though CLTV alone usually isn’t enough to get a full picture of a customer’s behavior. Which is why RFM and Repeat Customer Insights evaluate other factors too.

There’s a huge difference between a customer who placed a couple $2,000 orders compared to one who has placed 100x $40 orders.

Eric Davis

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