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Customer lifetime value

Measuring the value of customer loyalty

What is customer lifetime value?

Customer Lifetime Value (CLV or LTV) is a metric that predicts the net profit your brand will realize over the entire lifespan of that specific customer relationship. It measures how much revenue you can expect one customer to generate over the course of your business relationship.

What is client lifetime value?

Why is customer lifetime value important?

CLV essentially measures the value your brand is creating by driving long-term customer loyalty. The longer a customer continues to engage and ultimately purchase from your brand, the better your customer lifetime value becomes.

Why organizations should drive customer lifetime value as a KPI

  • CLV is a better predictor of business health than some of the other metrics that many businesses use to measure marketing results (like click-through rates and impressions) because it connects revenue and profit to engagement activities.

  • Customer lifetime value measures the success of your retention, nurture, and service engagements across all channels versus a small sliver of interactions that you might have in a particular channel.

  • CLV is a more reliable measurement of profitability, enabling better resource allocation by determining how much you should spend to acquire a new customer and still be profitable. Additionally, CLV determines where to focus your resources when acquiring and retaining those high CLV customers.

How to determine customer lifetime value

Measuring customer lifetime value requires your business to calculate all of the activities you undertake to acquire, serve, and retain your customers from brand awareness to win-back engagements. Then it weighs those costs against how much revenue you are able to generate with that relationship.

How to determine customer lifetime value

Discover how to maximize customer lifetime value with Pega

The Pega Customer Decision Hub™ is powered by artificial intelligence, enabling brands to deliver the right message, at the right time, in the right channel.

For further information on customer lifetime value

A one-to-one approach to managing customer lifetime value

Learn how Pega Customer Decision Hub can help drive long-term loyalty.

Creating significant customer lifetime value with hyper-personalized messaging

Find out how Natwest delivers hyper-personalized messages in-channel just seconds after a customer interacts.

Frequently Asked Questions on customer lifetime value

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Strategies to improve CLV might include improving product quality, enhancing customer service, implementing loyalty programs, and personalizing marketing efforts.

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Yes, CLV can vary widely depending on factors like product lifespan, customer loyalty, and purchase frequency in different industries.

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Predicting future behavior is inherently uncertain. Factors like competition, market changes, or macroeconomic shifts can impact CLV. Data limitations and the complexity of integrating different data sources can also be challenges.

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