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Glossary overview

Customer Lifetime Value

Armin Gögele, last updated on June 30, 2023

Customer lifetime value (CLV or CLTV) is a gauge of the profit associated with a particular customer relationship. Its calculation is based on past activities as well as on the prediction of future cash flow. The result is an average value that indicates the revenue a business can expect from a single customer account. Calculating customer lifetime value is important since it helps determine high-value customers and implement online marketing strategies in order to promote customer loyalty. High customer lifetime value can justify a budget increase related to support services offered to a certain, high-value customer. There is a distinction between a customer’s actual value and a customer’s potential value. While the customer’s actual value regards only revenue a customer generates for a business, the customer’s potential value includes the total revenue, event that generated for competitors.

Benefits of Customer Lifetime Value in Hotel Marketing

  • Long-term profitable guest retention and relationships
  • Control and optimization of marketing programs and budget
  • Assessment of current and future guest value
  • Utilization of up-selling and cross-selling potentials

The most important questions about Customer Lifetime Value

What is the purpose of Customer Lifetime Value?

The CLV is used to gain valuable insights into the success of a company. It helps determine which customer groups have the highest value for the company and what strategies are needed to retain them in the long term.

How can the Customer Lifetime Value be increased?

Hotels have the opportunity to increase CLV by providing exceptional customer experiences, offering personalized and targeted marketing campaigns, implementing effective loyalty programs, and continuously engaging with customers to build long-term relationships.

Why is it important to regularly monitor and analyze the Customer Lifetime Value?

Regular monitoring and analysis of the Customer Lifetime Value allow companies to identify changes in customer behavior and profitability at an early stage. This enables them to make timely adjustments to their marketing strategy and take targeted actions to increase customer value in the long term.