With rising competition in all the business segments, the brands are becoming concerned about the customer lifetime value (CLV). The CLV reflects the net profit attributed to the entire future relationship with a customer.

Econsultancy columnist Patricio Robles has shared five things every marketer should know about the CLV.

Robles says, “While CLV scores seem sensible in theory, and there’s every reason to believe that more and more companies will embrace them, companies should also be aware of the associated dangers when they consider using these scores. Here’s why.

CLV calculations aren’t necessarily accurate

For the growing number of companies that are attempting to calculate CLV for their customers, it’s important to keep in mind that there is no one way to calculate CLV. While there are common template formulas for calculating CLV for different types of companies based on industry, companies must ultimately decide how they will calculate CLV for their customers.

Many companies appear to be less than confident in their ability to do this. In fact, less than half of the marketers surveyed as part of Econsultancy’s Understanding Customer Lifetime Value report indicated that they were able to accurately calculate CLV”.

Why companies need to be careful about CLV scores

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