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How Does Customers Lifetime Value Contribute To Business Growth?

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What is customers lifetime value? How does it affect businesses and how do successful entrepreneurs utilize it to retain customers, sell more products and services to new and existing customers?

No matter your business models, concepts and strategies, if you lack customers you’ll lack sales.

When you lack sales, that means you already lack income and remember that lack of good business revenue is one of the major reasons entrepreneurs fail in business and go bankrupt today.

Your customers can either sack or promote you. It depends on where you find yourself.

Entrepreneurs and business owners who understand the value of keeping existing customers and seeking for new ones are always on top of their business niche.

Jeff Bezos understands how customers relate to product and services, no wonder he always focus on customers not minding the challenges facing amazon in its early lunch days.

Therefore, let us talk about customers lifetime value.

What Is Customers Lifetime Value (CLV)?

Customers lifetime value is a ratio that measures the total value of a customer to a business over the period of their business relationship.

This factor is used to estimate how much a business can invest in its customer acquisition cost since it shows the customer’s profitability to a business in a short and long term duration.

The lifetime value of a customer could be 1 year, 2 years or even 10 years and more.

When you know the value of a customer in your business, it will help you know how much you can afford to spend in keeping such customers and even acquiring new ones.

However, the idea here is to find the value of individual customers to your business.

For instance, if a customer continues to buy products or services from your business for 7 years and spends $200 per year, his or her customer lifetime value is $1400, minus any money you spent to acquire that customer.

Therefore, a business with 1000 active customers will enjoy more sales and value compared to another with just 50 to 100 active customers.

Now, imagine the large customer base of Amazon which serves millions of customers per hour, that’s crazy money isn’t?

This is because Jeff Bezos took the patience to build a huge customer base since the launch of the e-commerce platform on 5th July 1994.

The best customers service is if the customer doesn’t need to call you, doesn’t need to talk to you, it just works.

Jeff Bezos is an American entrepreneur and computer engineer. He founded e-commerce giant Amazon in 1994 out of his garage in Seattle and stepped down as CEO to become executive chairman on July 5, 2021.

ALSO READ: How to Build a Great Customers Service In 2 Years.

Importance Of Customers Lifetime Value:

  1. Businesses can avoid running at loss and losing money resulting from high customer acquisition cost.
  2. It helps business owners know how much can be spent to keep existing customers.
  3. The short and long term picture of a business financial stability can be seen ahead.
  4. It helps you know how much to invest in getting new customers to your business.
  5. You can work to improve on your existing customers patronage.
  6. It shows you the relevance rate and worth of each customer to your business.
  7. It is the best metric to balance customers and income.

Formula To Calculate The Customers Lifetime Value Of A Customer:

A simple way to calculate the lifetime value of a customer is to take record of how much the customer spends in your business and divide it by the duration.

For example, if Mr. A patronizes you for his first 1 year and spends a total of $1200 on your business. All you need to do here is to divide the amount by duration.

Hence, to check Mr. A customers lifetime value, simply divide $1200 by the 12 months in that year.

Therefore his customers lifetime value is equal to $100 monthly for his first year in patronizing you.

In addition, how do you now increase his customers lifetime value for the second year? I guess making him come for more patronage will be the answer.

Am sure you got that, okay let us move on.

How to Increase Your Business Customers Thereby Increasing The Customers Lifetime Value Your Business Enjoys:

  1. Never allow a customer go with his problem unsolved.
  2. Point out the problems your customers might be unaware of and offer a quick solution.
  3. Provide 24/7 customer support to your customers.
  4. Rapid response to customers dispute will increase customers trust.
  5. Offer one on one customer support when needed.

ALSO READ: 20 Ways To Drive Massive Customers To Your Business.

6 Ways to Boost Patronage To Your Business:

  1. Create a bundle package to grab bigger order values.
  2. Prioritize your customers over market competitors.
  3. Offer them promo values to make them keep coming back.
  4. Educate them about your products and services and point your brand as an expert to solve their needs.
  5. Collect customers contact information so you can always reach out to them at your schedules days.
  6. Inform your customers when you launch a new product that solves problems for them.

ALSO READ: How To Deal With Difficult Customers Without Abusing Them.


Everything about customers lifetime value is focused on the customer before any product or service is rendered.

You have to be a customer oriented person to succeed as an entrepreneur or a business owner.

In the words of Jeff Bezos who remain my mentor in good customers service.

He said “many companies describe themselves as customer focused, but few walk the walk. Most big technology companies are competitors focused. They see what others are doing, and then work to quickly follow”

Rather, the true formula remains customers first before competitions.

Share your opinions about this and spread the love by sharing.

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