Understanding customer lifetime value and rewards programmes

Posted on July 18, 2019 by Anthony Mortimer

Customer lifetime value has been cited as the most important metric, according to marketers and advertisers[i]

When looking to attract, nurture, convert and maintain customers, there’s a vast wealth of metrics and measurements that you can use to benchmark your performance. Many of these are well known, whereas others are perhaps more niche. But one thing is for sure, the more information you have, the easier it becomes to identify and improve your business’ sales numbers. One of the key metrics in sales and marketing departments is customer Lifetime value (LTV), and in this blog we’ll show you how to not only measure it, but also improve it.

Knowledge is power

Customer lifetime value is the estimation of revenue you can expect to receive from a single customer. To reach this number at your business, you need to know your customers’ average order value, the average purchase frequency, and the average customer lifespan.

Let’s say you sell bottles of water for £1. Typically, your customers will buy a bottle of water 5 days per week, and they tend to stay with your brand of water for 5 years. This means that your customer lifetime value is 1 (pound) x 5 (days) x 52 (weeks in a year) x 5 (years) = £1,300. So, now that you know your customer LTV, what can you do with it?

Revenue and profits

You can begin by ensuring that your marketing budget is not eating into your profit margins – e.g. if it costs £1,400 to generate a new customer, but they only spend £1,300 with your business, then this is a recipe for disaster. The second thing you can do is look to increase your customer LTV by increasing order values and order frequency. But, how?

Customer rewards

Well-timed and considered gifts are a great way to get prospects over the line faster – ensuring more of your customers’ LTV becomes profits. But, they are also a great way to show your customers you care. Surprising and delighting your existing customers with gifts and rewards is a great way to keep your brand front of their mind, highlight your recognition of their loyalty, and increase their propensity to buy from you again. The golden rule in this activity is make the gifts good. A error in choosing a customer gift could damage your brand reputation and potentially lose you customers and revenue.

M&S Corporate Gifts

With a simple ordering process, M&S Corporate gift cards, e-Gift cards and e-Codes are the perfect way to empower your customers to spend it well – on everything from stylish clothes, to a delicious meal. With the option to spend their gift in 730+ stores UK-wide and online, our gift cards and codes show your customers just how much you care and appreciate their loyalty.


[i] https://blog.hubspot.com/service/customer-acquisition