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

Topics

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

Teaching Notes

  • Preferred format: This teaching activity should be run in student pairs or small groups.
  • Student audience: This discussion exercise is more suitable for advanced students studying services marketing or marketing metrics.
  • Exercise time: This activity will probably run around 20-25 minutes.

Review the activity below or download the PDF student worksheet


Student Discussion Task

For this exercise, you will work through a complete calculation of customer lifetime value, which is provided over a ten-year period with all information clearly provided.

Your task is to essentially explain the mechanics of the calculation.

The following diagram can be enlarged by clicking, and it provides a ten-year view of customer lifetime value, with the final key CLV number listed in the bottom in yellow.

Fully worked calculation of customer lifetime value

Student Discussion Questions

  1. Work through each line of the calculation and take turns in your group to explain what is happening in each row.
  2. Once this is completed, work through the mechanics of the calculation and discuss why each row is necessary.
  3. What options with this particular situation have in order to improve final customer lifetime value (that is, what numbers could increase or decrease) to increase the final value?

Related Activities

Interpreting Customer Lifetime Value

Calculating Customer Lifetime Value (Basic Formula)

Justifying Marketing with Customer Lifetime Value

Working with Customer Lifetime Value

External Information

What is Customer Lifetime Value? (Shopify’s view)