May 25, 2021

Lifetime Value and Customer Development

Lifetime Value ... known as LTV in the early 1990s and frequently known as CLV today (Customer Lifetime Value), is the outcome of Customer Development efforts.

It is common for "brands" to measure lifetime value on a twelve-month basis, then invest in new customers by spending all of the profit generated by the new customer in the first full year on the file. In other words, the "brand" is willing to lose $18 profit acquiring the customer as long as the customer pays the "brand" at least $18 of profit in the next year.

I'm frequently surprised to hear companies tell me that they are disappointed with the lifetime value metrics generated by their in-house analysts. They'll argue that the measurements are flawed or that the payback windows are not appropriate.

All of this is nonsense, of course.

What the Executive is grumbling about is this ... the Executive is grumbling that her employees are doing a poor job of Developing Customers.

Few people want to face this reality.

But that's what is happening.

If you want great lifetime value metrics, get busy prioritizing the Development of your Customers.

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