TEAM 8
IMPLEMENTATION OF MARKETING
ANALYTICS- CLV
Overview
01 02 03 04
The Importance of CLV
Our Team Introduction How CLV is Calculated
in Marketing Analytics
05 06 07 08
Components Influencing Steps to Implement CLV CLV Segmentation and Optimizing Marketing
CLV in Marketing Analytics Customer Personas Spend Based on CLV
09 10 11
Challenges and Limitations Case Studies and Real-
Predictive CLV and AI in
of CLV Analysis World Examples
Marketing Analytics
12
Conclution
Our Team
VEDASHREE KALE 1062232723
UTKARSH NEMA 1062232574
VASEEM JAFAR 1062232143
VANSHIKA RAJPAL 1062232804
VAIBHAV MITTAL 1062230120
VIDIT AGARWAL 1062233043
VEDIKA AGARWAL 1062233042
YOGIT KANOJE 1062232825
INTRODUCTION
Customer Lifetime Value (CLV) is the total
amount of money a business expects to
earn from a customer throughout the
entire duration of their relationship. It is a
key metric used to estimate the long-term
value of a customer, taking into account
factors like repeat purchases, retention,
and the costs associated with acquiring
and serving the customer.
The Importance of CLV in Marketing
Analytics
CLV
Helps Prioritize Customers: CLV helps businesses focus on high-value
customers who are likely to generate more profit over time.
Improves Marketing Efficiency: By knowing which customers bring
the most value, companies can allocate marketing budgets more
effectively to attract and retain those customers.
Customer Retention: CLV highlights the importance of keeping
valuable customers, as retaining them is usually more cost-effective
than acquiring new ones.
The Importance of CLV in Marketing
Analytics
CLV
Informs Business Strategy: Understanding CLV allows companies to tailor
their strategies (e.g., promotions, pricing, products) to different customer
segments based on their value.
Long-Term Decision Making: CLV focuses on the long-term profitability of
a customer, which helps businesses plan for sustainable growth rather
than short-term gains.
Optimizes Resource Allocation: It guides businesses on how to invest their
time and money in areas that will maximize customer value, like improving
customer service or loyalty programs.
How CLV is Calculated
CLV Formula: CLV = (Average Purchase Value)
× (Purchase Frequency) × (Customer Lifespan)
Key Factors:
Average Purchase Value: How much a customer spends per purchase.
Purchase Frequency: How often they buy.
Customer Lifespan: How long they stay a customer.
Calculation Methods:
Historical CLV: Based on past data.
Predictive CLV: Uses data to forecast future value.
Cohort CLV: Groups customers by similar behaviors for more targeted insights.
Components Influencing CLV
Customer Acquisition Costs Retention Rate
Costs to acquire a new customer How long a customer stays with the company;
(marketing, sales). higher retention = higher CLV.
Purchase Frequency Average Purchase Value
More frequent purchases lead to higher CLV Higher spending per transaction increases
CLV.
Customer Experience
Positive experiences increase
customer loyalty and lifespan.
Steps to Implement CLV in
Marketing Analytics
Data Collection Data Analysis Tools
Gather customer data (transaction Use CRM systems, analytics software,
history, demographics, engagement). and predictive tools to analyze customer
data
CLV Model Creation Align Strategies
Build CLV models based on collected Use CLV insights to shape marketing
data (e.g., historical or predictive strategies, customer segmentation, and
models). resource allocation.
CLV Segmentation and Customer
Personas
Segment Customers by Create Customer
Targeted Marketing
CLV Personas
Group customers based on their lifetime Develop personas for different CLV Tailor marketing strategies for each segment
value (e.g., high CLV vs. low CLV). segments to better understand their needs (e.g., special offers for high CLV customers,
and behaviors. retention efforts for low CLV).
Optimizing
Marketing
Focus on High-Value Customers
Allocate more marketing budget towards retaining and
Spend Based on
acquiring high CLV customers.
Personalized Campaigns CLV
Create tailored marketing efforts (e.g., exclusive offers,
loyalty programs) for high CLV segments.
Cost-Effective Marketing
Spend less on low CLV customers or those less likely to
generate long-term value.
Increase ROI
By focusing on high CLV, marketing spend becomes more
efficient, leading to better returns.
Predictive CLV and AI in
Marketing Analytics
Predictive CLV AI Integration
Uses historical data and advanced Machine learning models predict
algorithms to forecast future customer customer behavior, helping businesses
value. anticipate high-value customers.
Improved Accuracy Targeted Marketing
AI-driven models provide more accurate Predictive CLV helps in targeting the right
CLV predictions by identifying patterns customers for upselling, cross-selling, and
and trends in customer data. retention efforts.
Challenges and Limitations of CLV Analysis
Data Quality
Issues
Changing Customer
Inaccurate or incomplete Behavior Integration
data can lead to incorrect Challenges
CLV calculations. CLV predictions may
not always account for Combining data from
sudden changes in different sources (e.g.,
customer behavior or CRM, sales) can be
Complexity of difficult and time-
Modeling market conditions.
consuming.
Predictive CLV models Bias in Data
can be complex and
require sophisticated Data may reflect biases
tools and expertise that affect the accuracy
of CLV predictions (e.g.,
overestimating the
value of certain
customer segments).
1. Successful Use of CLV:
Case Studies
Amazon: Amazon uses CLV to understand the
long-term value of its customers, optimizing its and Real-World
marketing efforts. By predicting the lifetime
value of a customer, Amazon is able to offer
Examples
personalized product recommendations,
loyalty rewards, and targeted promotions to
maximize customer retention and increase
repeat purchases.
2. Customer Segmentation Based on
CLV
Coca-Cola: Coca-Cola uses CLV to segment
customers based on their purchase patterns. High
CLV customers, such as large retail chains, receive
exclusive promotions or bulk purchase discounts,
while smaller retailers or low CLV customers may
receive general offers. This allows the brand to
efficiently allocate resources and increase sales
from high-value customers.
3. Marketing Spend Allocation:
Case Studies
and Real-World
Subscription Services (e.g., Spotify, Hulu): Subscription-
based services often use CLV to prioritize spending on
Examples
high-value customers. For example, companies like
Spotify and Hulu focus marketing efforts on retaining
long-term customers, offering personalized playlists or
exclusive content. They also use CLV to fine-tune
customer acquisition strategies, ensuring that marketing
budgets are allocated to attract customers who are likely
to stay and contribute to higher revenue.
4. Retention Strategies:
Apple: Apple uses CLV to drive retention
strategies by offering products and services that
encourage customers to stay within its ecosystem
(i.e., iPhone, Apple Music, iCloud). They calculate
the potential CLV of each customer to focus on
retaining high-value users, sending personalized
offers or product upgrade suggestions to increase
their lifetime value.
5. Real-World Impact:
Case Studies
Loyalty Programs: Many companies use CLV
insights to design effective loyalty programs. For and Real-World
example, Starbucks tracks CLV to reward its most
loyal customers with personalized offers, exclusive
Examples
rewards, and early access to new products,
encouraging them to continue spending.
Key Takeaways:
By using CLV, companies can allocate resources more efficiently,
focusing on high-value customers who will generate the most
revenue over time.
CLV also helps in crafting more personalized marketing campaigns
and improving customer loyalty, which ultimately leads to long-term
profitability.
Real-world examples show how businesses across industries (e.g., e-
commerce, entertainment, retail, and services) leverage CLV to
optimize marketing spend and improve customer retention
strategies.
Conclusion
In conclusion, Customer Lifetime Value (CLV) is a crucial metric for
understanding the long-term profitability of customers. It helps
businesses calculate the total value a customer brings over their entire
relationship, guiding decisions on marketing spend, customer
retention, and resource allocation.
By calculating CLV, companies can segment their customers,
personalize marketing strategies, and optimize efforts to retain high-
value customers, ultimately maximizing return on investment (ROI).
CLV is not only a powerful tool for improving customer engagement
but also a strategic asset for sustainable business growth.
As businesses increasingly incorporate predictive analytics and AI, the
accuracy of CLV predictions will enhance, offering more precise
insights and better outcomes.
Implementing CLV into marketing strategies ensures companies
prioritize valuable customers, leading to higher profitability and long-
term success.
