Customer lifetime value (CLV) calculation in Digital Marketing - Mini Project: Build & Apply

Customer Lifetime Value (CLV) Calculation

📖 Scenario: You work for an online store that wants to understand how valuable each customer is over time. This helps the store decide how much to spend on marketing and customer service.

🎯 Goal: Build a simple step-by-step calculation of Customer Lifetime Value (CLV) using basic data about customers' purchases and retention.

📋 What You'll Learn

Create a data structure with customer purchase data

Add a variable for average customer lifespan in years

Calculate the average purchase value per customer

Calculate the Customer Lifetime Value using the formula

💡 Why This Matters

🌍 Real World

Businesses use CLV to decide how much to invest in acquiring and keeping customers, improving marketing strategies and profitability.

💼 Career

Marketing analysts, business managers, and data analysts often calculate CLV to guide decisions and measure customer value.

1

Set up customer purchase data

Create a dictionary called customer_purchases with these exact entries: 'Alice': 120, 'Bob': 80, 'Charlie': 150, 'Diana': 100. The numbers represent total purchase amounts in dollars.

Digital Marketing

# Create the customer_purchases dictionary with exact entries
# Your code here

Need a hint?

Use curly braces to create a dictionary with customer names as keys and purchase amounts as values.

2

Add average customer lifespan

Create a variable called average_lifespan_years and set it to 5, representing the average number of years a customer stays active.

Digital Marketing

customer_purchases = {'Alice': 120, 'Bob': 80, 'Charlie': 150, 'Diana': 100}
# Create average_lifespan_years variable and set it to 5
# Your code here

Need a hint?

This is a simple number variable representing years.

3

Calculate average purchase value

Create a variable called average_purchase_value that calculates the average purchase amount per customer by summing all values in customer_purchases and dividing by the number of customers.

Digital Marketing

customer_purchases = {'Alice': 120, 'Bob': 80, 'Charlie': 150, 'Diana': 100}
average_lifespan_years = 5
# Calculate average_purchase_value below
# Your code here

Need a hint?

Use sum() to add all purchase amounts and len() to count customers.

4

Calculate Customer Lifetime Value (CLV)

Create a variable called customer_lifetime_value that multiplies average_purchase_value by average_lifespan_years to find the total value a customer brings over their lifetime.

Digital Marketing

customer_purchases = {'Alice': 120, 'Bob': 80, 'Charlie': 150, 'Diana': 100}
average_lifespan_years = 5
average_purchase_value = sum(customer_purchases.values()) / len(customer_purchases)
# Calculate customer_lifetime_value below
# Your code here

Need a hint?

Multiply the average purchase value by the average lifespan to get CLV.