How would Colgate estimate the customer lifetime value of their loyal customers ?
Customer lifetime value (CLV) refers to the cumulative amount of money a customer is supposed to spend in your company or on your goods over the course of their lifetime. This is a vital number to understand because it lets companies decide how much money to spend on attracting new customers and keeping existing ones, what kinds of products customers with the highest CLV want, which products have the highest profitability, who you’re most profitable types of clients are as a whole.
The common and easiest way to estimate the customer lifetime value of their loyal customers not only for Colgate but any business as a whole is:
CLV = Average value of a purchase X Number of times the customer will buy each year X Average length of the customer relationship (in years).
So a customer X from the specific segment on the basis of the STP model as a whole who regularly buys Colgate from the market might be worth.
$4 per piece X 6 piece per year X 8 years = $4x6x8= $192