Customer Lifetime Value (CLV) in the context of a contact center refers to the estimated total value that a customer is expected to generate for a company over the entire duration of their relationship with the company. It is a critical metric used to assess the long-term financial impact of acquiring and retaining customers and is essential for making strategic decisions related to customer acquisition, retention, and service quality. Contact centers play a crucial role in impacting CLV by providing customer support, resolving issues, and maintaining positive customer experiences. Satisfied customers are more likely to continue their relationship with the company, leading to higher CLV.
CLV is closely related to churn rate, as retaining customers over the long term is essential for maximizing their value to the business.
CLV is typically calculated by considering the average revenue generated from a customer during their relationship with the company and subtracting the associated costs, including marketing, customer service, and operational expenses. The formula for CLV may vary based on the specific context and industry. CLV calculations are also often made over an extended period, which can vary depending on the nature of the business. It can span months or years, taking into account repeat purchases, renewals, and ongoing interactions.
More Customer Lifetime Value (CLV) Resources for Call & Contact Centers
You don’t have to be a mathematician to understand the importance of customer lifetime value. By understanding the customer experience you deliver from acquisition throughout your relationship with customers and quantifying feedback at all key touchpoints, you’’ be able to understand the key drivers of your CLV.
CLV is a metric that makes the most sense for customers you’ve had for a long time— think a mortgage customer or a long-time bank account holder. CLV not only tells you what your customer relationships are worth, it’s a fantastic way to spot customer churn. Do you notice that in the past year less and less money has been deposited into an account? Has a credit card gone unused with a $0 balance for an extended period of time? CLV can help you get to the bottom of customer inactivity and triage new methods of engagement and retention.
Rather than waiting for customers to reach out with problems or inquiries, proactively engage with them. Implement outreach programs that offer value, such as exclusive offers, personalized recommendations, or relevant updates. By staying top of mind and building meaningful connections, you can drive repeat purchases and increase customer lifetime value.
Top Opportunities for CX & Contact Center Leaders in 2022, Part 2: More Insights from Industry Experts
The biggest opportunity for CX leaders is to start treating CX like a business discipline. By that, I mean they need to adopt solid business metrics and work to improve them. While the specific business metric will vary by type of business, my favorite overall is Net Revenue Retention. Customer Lifetime Value is another good one, but it’s harder to calculate.