Homework answers / question archive / According to the cases to calculate Customer Life Time Value (CLV) There is no single formula or spreadsheet macro you can use to create CLV models

According to the cases to calculate Customer Life Time Value (CLV) There is no single formula or spreadsheet macro you can use to create CLV models

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According to the cases to calculate Customer Life Time Value (CLV)

There is no single formula or spreadsheet macro you can use to create CLV models.  It is something that has to be constructed from scratch to capture all the intricacies and nuances specific to a marketing problem.There is however, a general set of steps that can guide your creation of a CLV model.  

1. Identify all factors that influence revenues, costs, and net present value calculations.  If something unknown but necessary to complete your valuation, make assumptions and identify these variables as assumptions.

2. On a spreadsheet, layout the variables into three categories: revenues, costs, and NPV.  List all values under the appropriate headers, also identify the time frame of your NPV valuation (usually between 3 to 10 years).

3.  Fill in the values for each of the years, calculate net contribution with revenues and costs, adjust for NPV, appropriately sum for CLV.

That's pretty much it.  Let's take a look at a couple examples.