Retail customer lifetime value

This measure calculates customer lifetime value (CLV) for the retail operation. CLV is defined by the following equation: Margin * (Customer Retention Rate / ((1 + Discount Rate) - Customer Retention Rate)); where Margin is the contribution after deducting variable costs including retention spending, Customer Retention Rate is defined as the number of customers who were active three years ago and are still active, divided by the number of customers who were active three years ago, and Discount Rate is the cost of capital used to discount future revenue from a customer. This Supplemental Information measure is intended to help companies evaluate additional variables related to the process "Perform customer and market intelligence analysis".

Benchmark Data

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Measure Category:
Supplemental Information
Measure Id:
106159
Total Sample Size:
80 All Companies
Performers:
25th
– Median
– 75th
–
Key Performance
Indicator:
Yes

Compute this Measure

Units for this measure are dollars.

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Customer lifetime value (CLV) for your retail operation

Key Terms

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Supplemental Information

Supplemental information is data that APQC determines is relevant to decision support for a specific process, but does not fit into the other measure categories such as cost effectiveness, cycle time, or staff productivity.

Median

The metric value which represents the 50th percentile of a peer group. This could also be communicated as the metric value where half of the peer group sample shows lower performance than the expressed metric value or half of the peer group sample shows higher performance than the expressed metric value.

Measure Scope

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Cross Industry (7.3.0)

  • 3.1.1.1 - Conduct customer and market research (10108) - Carrying out research studies to understand the behavior of customers and the realities of the market. Undertake research to understand the market conditions as well as the characteristics, drives, and desires of prospective customers. Gather highly contextualized intelligence through primary and secondary research methods, with the objective of gaining insights over how to best seize a market opportunity. Consider assistance from professional research services.
    • 3.1.1.1.1 - Understand consumer needs and historical behaviors (10114) - Identifying the factors that drive the targeted market segment. Model customer purchasing patterns, and forecast their future purchasing behavior.
    • 3.1.1.1.2 - Predict customer purchasing behavior (21424) - Using customer segmentation tools to examine past customer behavior to predict future purchasing patterns.
  • 3.1.1.2 - Identify market segments (10109) - Identifying a section of the customer population to target for marketing products/services. Create segments within the customer population for targeted marketing campaigns, which increase the efficacy of marketing outlay. Determine the right customer segments, craft effective marketing messages, and efficiently communicate them. Determine the optimal pricing mix. Consider assistance from professional services for market segmentation studies, with coordination and oversight from the marketing/sales functions.
    • 3.1.1.2.1 - Determine market share gain/loss (10115) - Determining the increase or decrease of the company's sales volume in the targeted markets. Conduct an analysis to determine the factors and underlying causes that affect the changes in the demand for products or services offered. Consider changes in offerings or in the business strategy to regain or increase the market share.
  • 3.1.1.3 - Analyze market and industry trends (10110) - Examining large-scale shifts and trends, with relevance to the organization's products/services. Vet the industrial and larger market landscape to identify broad-based movements that could have a direct or tangential impact on the uptake of the organization's products/services. Examine, among other things, the market capitalization of similar products, the profitability of organizations offering competing products/services, the stock price of key vendors/suppliers in the organizational value-chain, the rate and scale of innovation activity in the organization's product/service category, the price and availability of raw materials, and the shelf-life of similar products/services. Conduct primary and secondary research, and consider enlisting professional services.
  • 3.1.1.4 - Analyze competing organizations, competitive/substitute products/services (10111) - Examining the strengths and weaknesses of competing organizations. Assess competing organizations for offerings, product strategy, marketing and delivery channels, etc. Analyze the usability experience, durability, USP, and other key attributes of competing and substitute products. Gather competitive intelligence, and consider enlisting professional services.
  • 3.1.1.5 - Evaluate existing products/services (10112) - Examining the brands owned and products offered in the market. Determine the relative position of the existing products/brands in the marketplace.
  • 3.1.1.6 - Assess internal and external business environment (10113) - Understanding the culture and environment in which you're operating. Analyze how internal decision-making, thought processes, financial circumstances, and more affect the ability to bring new products to market. Survey or analyze the market into which the products would be introduced.