What is a Customer Lifetime Value Dashboard
A Tableau customer lifetime value dashboard can be an invaluable tool for a company to understand and maximise the value of its customer base. It shows metrics related to customer lifetime values.
What Is Customer Lifetime Value?
Customer lifetime value is the profit a customer will yield during their relationship with your company. It is the total worth of their interaction with your business.
It’s an essential metric as keeping existing customers costs less than getting new ones. Increasing the value of your existing customers is a great way to drive growth. It is an estimate of the average gross revenue that a customer will generate before they churn. We can use a customer lifetime value dashboard to track customer lifetime value over time easily.
Why is a Tableau Customer Lifetime Value Dashboard Important to Your Company?
The best way for any business to maximize shareholder value is to maximize the CLTV. Customers are critical assets for a firm. Thus, customer lifetime value is the essential metric for marketing. Maximize every customer’s profitability and maximise your company’s valuation. We can easily view this metric using a Tableau customer lifetime value dashboard.
CLV is the value your business receives from customers during your relationship. We want to be able to see this instantly and regularly. This is where a Tableau customer lifetime value dashboard comes into play.
To illustrate this concept with a metaphor, we can use the idea of a “Fruitful Orchard.” (Please skip ahead if you do not enjoy fruit metaphors.)
Explanation: Imagine a business as a beautiful orchard full of various fruit trees. Each tree represents a customer. The fruits they bear symbolize the revenue generated from their purchases. These trees continue to deliver fruits season after season. This is the ongoing value the customers bring to the business.
Nurturing Customers
An orchard requires care, attention, and nurturing to thrive and produce high-quality fruits. Your business invests in customer relationships through products, services, and customer support.
Long-term Yield
An orchard takes time to mature and reach its full potential. CLV emphasizes the long-term value of customers.
Harvesting over Many Seasons
An orchard provides fruits during each harvest season. Customers can make many purchases over their lifetime. This contributes to your business’s revenue over time.
Variety of Fruits
An orchard may have different types of fruit trees. Each customer may have varying levels of spending and engagement. Some customers might be occasional buyers. In contrast, others become loyal brand advocates and make frequent purchases.
Reinvestment
Farmers invest in maintaining and growing their orchards. Your business reinvests in customer retention strategies to keep your customer base strong. Be like a farmer.
Tableau Customer Lifetime Value Dashboard Calculations
The overall formula for customer lifetime value is the following:
Average Order Purchase Value
The average order purchase value can be calculated with the following information.
First, we determine the entire gross margin for the period. The gross margin is the revenue minus the costs of goods sold.
We then divide by the total count of orders for a period.
When we do that, we are left with the gross sales per order or the average order purchase value. We are left with the following on the Tableau customer lifetime value dashboard:
Average Order per Customer
Firstly, we want to know how many customers there are by completing a count of customers for some time.
The next step is to determine the number of orders we have per period
Then we divide the customer count by the number of orders per period to get the average orders per customers
Customer Lifetime Calculation
The calculation for customer lifetime is:
- The sum of the customer’s duration (e.g. min date and max date difference)
- Divided by the count of customers
- Divided by 365 to convert days to years.
This gives the average customer a lifetime.
Customer Lifetime Value Dashboard Challenges
Data Quality
Inaccurate or incomplete customer data can lead to unreliable CLV calculations.
Data Integration
Integrating data from various sources (sales, marketing, customer service) can be challenging.
Customer Behavior
Predicting customer behaviour over the long term is uncertain and subject to change.
Time Horizon
Determining the appropriate time horizon for CLV calculations can be subjective.
Customer Churn
Predicting customer churn is difficult. It depends on various external and internal factors.
Acquisition Costs
Calculating customer acquisition costs and attributing them to specific customers can be complex.
Many Products/Services
Diverse products or services introduce complexities in determining CLV.
Summary
In summary, it was determined that the orchard metaphor was slightly strained, so please ignore that. But please, do not ignore customer lifetime value, as your business depends on it!!!
