Justifying Marketing with CLV

Topics

customer lifetime value, CLV, customer relationship management, services, analysis

Your task with this activity is to defend the recent expenditure of a marketing campaign. The key to your argument will revolve around the customer lifetime value concept. Review the following statement and determine how you could you defend the marketing program.


Review the activity below or download the PDF student worksheet


Student Discussion Task

Assume that the following statement was recently made by a manager from your firm:

Our firm just ran this big campaign to get new customers.  And did you know that they spent around $1m and they only got 1,000 new customers!

I think that’s really dumb because we only make an average of $500 a year from our customers. And some of them are only customers for a year!!!

OK, some are customers for up to 5 years, but it takes a long time to get our money back. I just think that they don’t know what they’re doing in marketing!


Student Discussion Questions

  1. How would you respond to the above statement (assuming that you worked in marketing)?
  2. How could you use the concept of customer lifetime value (CLV) to help strengthen your argument?
  3. Do you think that this particular manager could be convinced by your view? Why/why not?
  4. Does this situation illustrate a problem with the firm’s internal marketing (communications) activities? What should be done here?

Related Activities

Customer Lifetime Value Calculation (a step-by-step guide)

Calculating Customer Lifetime Value (Basic Formula)

Interpreting Customer Lifetime Value

Working with Customer Lifetime Value

Additional External Resources

Link to the free online CLV calculator, ideal for students to play around with.

Plus here is an example customer lifetime value calculation.