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Purpose of customer
lifetime value & its
relationship with
Machine Learning
explained in detail

Purpose of customer lifetime value & its relationship with Machine Learning explained in detail


We are in the era of a highly-competitive world that is in a cut-throat market demanding excellent customer service and quality products. For businesses to survive and keep up with the volatile market, customer lifetime value (CLV) offers an opportunity for companies to find the most profitable customers. By using CLV, managers have a better chance of retaining their best customers, and using CLV, along with machine learning, businesses can accurately predict customers’ lifetime value.

Even though CLV can be one of the essential parts of the business strategy, many organizations fail to implement it.
When businesses opt for CLV, they aim to use the customer data to predict customer lifetime value, which will help improve targeting and increase ROI. However, CLV is often ineffective because they are not utilized efficiently. In this case, a machine learning solution can accurately predict the CLV based on demographic information and purchase history.

Let’s dive deeper into understanding Customer Lifetime Value (CLV) and learn how machine learning can help improve the prediction for a more accurate CLV.

What is Customer Lifetime Value?

Customer lifetime value is a metric to calculate how much your customer is worth to you over their entire period of association with your service. It does not measure the customer’s total spend on their purchase but rather how long they will continue to associate with you until they no longer require the product or service. The fact is that a customer who sticks with you for longer, who shops with you for more categories and spends more money means higher profit. That is why it is so essential to understand their lifetime value. Understanding the lifetime value of a customer is vital for businesses to effectively manage resources, plan marketing campaigns, and provide new services.

For instance, your customer spends X amount in a single transaction which is higher than other customers. However, the recurring customers have a higher LTV than those who make a one-time purchase, even if it’s a higher amount.

How can Machine Learning (ML) help to predict Customer Life Value (CLV) ?

ML is the application of data analytics, algorithms, and statistical methods to predict future behavior for better decision-making. Machine Learning relies on algorithms and statistics to draw insights, not based on predetermined calculations. With this method, computers can be trained to be able to do something with a minimal set of instructions.

Using machine learning with predictive analytics can help business managers make smart decisions. It is considered valuable when calculating CLV as it deals with many numbers and data to evaluate. With the use of machine learning with CLV, marketing professionals can learn which customers are more valuable and what are the best marketing channels to target to derive high ROI. The advanced analytics and machine learning solutions enable companies to quickly analyze their data and utilize the new insight to formulate a robust marketing campaign. This helps professionals bring valuable customers for a lower cost, ultimately boosting their ROI.

How can you effectively use CLV prediction in your marketing initiatives ?

Customer lifetime value (CLV) is an essential metric for businesses seeking to improve customer retention. It plays a vital role in B2B and B2C e-commerce because it can help companies gain insight into the ideal customer segmentation while providing valuable information on efficiently allocating products and services to specific customers. The lifetime value of a customer cannot be understated. It is crucial to any business, especially in e-commerce, where repeat customers are gold.

Increasing customer lifetime value is a key in every business. By maintaining a strong relationship with customers, you will see a higher profit even when there’s a decline in new customers. Customer lifetime value can help you find the perfect balance between customer retention and acquisition.

Customer lifetime value prediction is a dynamic forecasting model used by big businesses worldwide to predict customer retention rates. The model predicts the chances of customer return given their level of satisfaction with your product or service. The higher their expected return rate, the more likely it is that you can leverage their product experience to make them stay loyal to your brand. In other words, CLTV helps you understand how to keep returning customers.

As the analysis and algorithms are becoming increasingly sophisticated with time, the power of predictive behavior analysis is increasing. Technology has entered a new era that’s data-driven and is influenced by artificial intelligence, machine learning, and social media. This technology can help get much more accurate forecasting of customer lifetime value.


Artificial intelligence and machine learning in the financial sector of banking are constantly expanding. Banks use predictive technology to anticipate which products will appeal to the customer and how to deal with customer complaints. This allows an organization to understand serious issues and respond before a problem arises. Companies use machine learning algorithms in order to increase customer loyalty, boost sales, and find a way to retain customers. One of the ways that companies use data analytics is by analyzing customer information and interests. Machine learning works best when it can access real-time data on customer complaints, which is how it can better predict customer needs.


The healthcare industry is highly regulated, and with it comes responsibility. Due to the infinitely complex and diverse client base, the lifetime value of a client is necessary. It will help focus on particular clients, allowing better management and healthcare practice. Understanding your patient’s expectations and their experience is crucial. Creating a positive atmosphere, listening to comments from your patients, and sending helpful reminders about appointments will allow patients to stay up to date with their health.

How do you implement Customer Lifetime Value into your business model ?

Understanding CLV can help you better allocate investment across channels and optimize marketing effectiveness across the funnel. Let’s look at how you can use CLV to help you grow your business line for years to come.

First Collect Relevant Data for Analysis

You need to collect relevant data to get an accurate CLV prediction. Business intelligence can help you deal with massive data and conduct predictive analysis. While evaluating the data, you should focus on these questions that will help you determine the goal that you want to achieve with CLV.

  • What is the most prolonged period the customer is associated with your brand?
  • What is the demographic of the customer?
  • How did your customers respond to discounts and offers?
  • What is the recurring and highest amount spent by a customer?

These are some of the questions that will help you get the best results from CLV.

Build a modern solutions model

External factors such as natural disasters, currency fluctuations, market collapse, and political unrest affect the banking and finance industry. Under such circumstances, businesses have to be extra careful. AI-powered with data analytics can help managers understand the market better and make timely decisions.

Implement machine learning for determining the customer lifetime value

Now you can use machine learning to formulate the best marketing strategy by processing data quickly and correctly identifying patterns. You can create a set of questions for machine learning to respond to. Here are the questions as examples:

  • What is the best marketing channel to target customers?
  • What activities result in a higher conversion rate?
  • What is the average cost per conversion?
  • Which customers have the highest customer lifetime value?

    Machine learning is a complicated and time-consuming process. To ensure everything works properly and reach the best results, we advise you to work with professionals. Otherwise, you may waste your time and money on something that doesn’t bring value to your business.

Learn buyer persona

To learn more about your customers, use the feedback channels, customer analysis, and market research to figure out how to get the most value from your customers. Learning about your customer’s expectations will help you get a deeper understanding of your current and potential customers. You will learn their pain points, likes, demographics, and their preferred shopping methods.

Loyalty Programs

Companies that use a loyalty program are able to provide value-based service and improve the value of their customers. By creating a loyalty program, you and your customers caan benefit from them. You also get relevant data to create a much better customer experience.

Provide unique deals and discounts

Customers enjoy discounts and offers that help them save money or gain additional benefits. You can use this method to retain your existing customers and also attract new prospects as well. Based on a customer’s unique preferences, you can offer discounts or deals that will increase the lifetime value.


Over time, we’ve all learned that customer lifetime value is the metric that talks about the value of a customer’s spending over their lifetime. Using machine learning along with CLV, businesses can identify accurate predictions to tailor marketing activities that best suit customer preferences. By doing this, the holistic view of marketing can be vastly improved. They could also drill down to a single customer to anticipate future spending habits and increase conversion through better targeting.

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