Question

Which woman has the most valuable CLV?

Shirley: purchased $400 in December and spent nothing else the rest of the year for a total of $400.
Marcia: spent between $10 and $65 each month from December to November for a total of $355.

Answer 1

Marcia should have the highest CLV

Step-by-step explanation:

there are several formulas for calculating customer lifetime value (CLV) but since the amount of information is limited, then I'll use the easiest one (for me at least).

CLV = T x AOV x AGM x ALT

• T = average transactions per month
• AOV = average order value
• AGM = average gross margin (we are not given enough information)
• ALT = average life span

Marcia Shirley

T 12 per year 1 per year

AOV $355 / 12 = $29.58 $400

AGM N/A N/A

ALT since she is a regular client, 1

at least 2 years (this one and next)

Marcia's CLV = 12 x $29.58 x 2 = $709.92

Shirley's CLV = 1 x $400 x 1 = $400

Given the limited information, we can assume that Marcia is a much more valuable client than Shirley.

Answer 2

Marcia

Explanation:

Marcia has the most valuable CLV (Customer life time value) as she continuously spents her money on the business.

Using the formula

CLV = Average value of customer purchase X Number of times the customer will buy each Year X Average length of the customer relationship (in years).

Marcia's CLV= $10 X 1 X 1 =$10

Shirley's CLV= $400 X 0 X 1=$1

Remember, the Customer life time value is a measure of a customer's worth to a business in terms of how much money they will spend on products during their life time.