Best Practices for Using Customer Lifetime Value (CLV) Data

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Overview

Customer Lifetime Value (CLV) is the total amount, both past and predicted, a customer will purchase over their lifetime. In Klaviyo, we track customers' past purchases, as well as predict their future purchase behavior.

This article walks through the basic terms you'll need to understand CLV in Klaviyo, and then covers some best practice ideas for using CLV data in Klaviyo. Follow along with the video below as we walk through each of the ideas covered in this guide.

Please note that CLV calculations are only available in your account if you meet the following conditions:

  • At least 500 customers have placed an order. This does not refer to Active Profiles, but rather the number of people who have actually made a purchase with your business. If the predictive analytics section appears on a profile but is blank, this means Klaviyo does not have enough data on that individual to make a prediction.
  • You have an ecommerce integration (e.g. Shopify, BigCommerce, Magento) or use our API to send placed orders.
  • You have at least 180 days of order history and have had orders within the last 30 days.
  • You have at least some customers who have placed 3 or more orders.

CLV Properties

Let's run through some terms to help you understand how to use CLV in your Klaviyo account.

  • Historic CLV: How much a customer has spent in the past
  • Predicted CLV: How much a customer will most likely spend in the future
  • Total CLV: An aggregation of the Historic CLV and Predicted CLV values
  • Historic Number of Orders: How many orders a customer has placed
  • Predicted Number of Orders: How many orders a customer will likely place in the future using Klaviyo's CLV model

Please note that because of natural changes to your list and our Data Science team is continually improving our predictive analytics algorithm, you'll want to refresh the export and following calcuations around once every 3 months.

Best Practices for Grouping Customers by CLV

While Klaviyo gives you the option to find your most engaged subscribers, target customers who spend the most, and even create customizable analytics views all inside of your Klaviyo account, you still may want to do more intense data processing with CLV in Excel or Google Sheets. Let's walk through how you would find spending thresholds to group your customers by low-, medium-, and high-customer lifetime value (CLV).

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First, in your Klaviyo account, create a segment of people who have placed at least one order.

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Export the segment (Manage Segment > Export Segment as CSV) with all of the following CLV related data.

  • Historic Customer Lifetime Value
  • Predicted Customer Lifetime Value
  • Total Customer Lifetime Value
  • Predicted Number of Orders
  • Church Risk Prediction
  • Average Days Between Orders
  • UTM Medium

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From there, open up our Klaviyo CLV Calculation Template tool and follow the instructions on the Instructions tab.

Projecting 12-month Revenue from Existing Customers

In this example, you can use your current customers' spending habits to predict how much revenue you'll receive from them in the next 12-month window. You can use this to determine how much you'll need from new customers to meet your financial goals, or to create a spending budget.

Click over to the Calculations tab in the Template in Google Sheets and look for the value in the uppermost left-hand cell (A2).

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Identify your Most Productive Media Channel

This procedure requires that you have Klaviyo's web tracking installed. The following guide includes step-by-step instructions for installing Klaviyo web tracking on your site if you haven't already.

You can use total CLV to assess the importance of each channel for your business and to determine how much time you should be spending on each channel.

Click over to the Source Pivot Chart tab in the Template in Google Sheets. The Count of UTM_Medium column tells you how many people came in from each media channel. For example, in the below screenshot, Facebook Ads (facebook_ads) pulled in 88 customers into the account. Additionally, the Sum of Historic CLV column shows how much revenue each channel generated in the past. For example, Facebook Ads pulled in the most at almost $10,000.

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This information can inform where you put your creative or marketing efforts, as well as areas of improvement. In this example, Facebook Ads brought in a lot of people who converted into customers. It would be smart to increase marketing efforts in creating top-notch Facebook Ads. Additionally, if we knew that our potential customers spend a lot of time on Pinterest, we could boost creative efforts to our Pinterest Paid ads and see if we can get more of the audience on Pinterest to convert.

Get Potential VIPs Excited About Your Brand

You can use the CLV model to identify potential VIPs. These customers are those who may not have purchased much in the past, but have a few recent purchases and look like they could become a high-value customer.

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Create a segment of Potential VIPs by grouping people who have placed an order before, have a low to medium historic CLV, and high predicted CLV (from the Calculations tab). This is a great group to clue in about exclusive content and to give a heads up about new or coming collections.

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Give Special Attention to Your Most Valuable Customers

You can use Total CLV to target your most valuable customers with personalized messages. Invite them to special events or give them access to exclusive content. Treat them like the superstars that they are. In the below example, a follow-up campaign could invite them to a special event you're hosting in a brick-and-mortar store where they can get first dibs on a limited edition product.

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Create Purchasing Tiered Welcome Flows

When someone surpasses either a spending threshold or a certain predicted CLV value, send them a welcome series thanking them for being a valued customer. Consider also including a coupon as a token of your appreciation.

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Different Popups For Different Shopping Behaviors

Your personalization doesn't have to just be in your emails extend your targeted marketing to your website. Edit the settings on your Signup Form to target visitors differently from CLV-based segments.

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Create a Most Valuable Customer Lookalike Audience 

Harness the power of CLV to identify your best customers and create a Lookalike Audience through Facebook. Make a segment that filters based on a high or top 10% of customers' total CLV. From there, use Facebook's Lookalike Tool to run a targeted ad. Check out our article how to create a Facebook Lookalike Audience based on CLV for step-by-step instructions.

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Customer Insights

Lastly, you can use CLV to understand how customers in different CLV groups respond to your products. Divide your customers into unengaged, middle-of-the-road, and VIP groups. Select a sample of them and send a plain text email asking to chat or send a survey with an incentive.

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To access the tool used in this doc, you can download the Klaviyo CLV Calculation Template tool here.