In determining what the customer lifetime value (CLV) is the lifespan of the product must be considered. The longer life span the product has the lower the customer life value will be since there wont be as much of a need to replace the product over the customer’s life.
In terms of creating a marketing campaign, the higher the potential for a high customer life value the higher the advertising budget will be. This makes companies focus on long term customer relationships to build long term profits over concentrating simply on short term profit.
Marketing mix modeling uses the calculations gained from the customer life value to draw future plans in creating optimized marketing campaigns. Customer life value only looks to the future of the customer’s potential purchases and does not include past purchases, so it would be continually updated when new purchases are made based on the timespan between purchases and the type of purchase.Back to Glossary Index