What is Average Customer Value (ACV) and Customer Lifetime Value (CLV)?

Average customer value (AVC) and customer lifetime value (CLV) are both insightful metrics to track when growing predictability and determining how much money you invest into all your customers. 

ACV tells you how much a customer is worth by measuring the average value of revenue each customer brings to your business within a set timeframe. On the other hand, CLV tells you how much money you can spend to acquire and retain each customer, which can help  increase your overall customer value.

Why is Average Customer Value Important?

ACV measures the immediate impact that a specific marketing funnel is having on conversions and sheds light on acquisition costs. 

Your aim should be to increase ACV for all your marketing campaigns. This makes it easier to outbid your potential and existing competitors for ad space on programmatic platforms, as well as boost the overall profitability of your campaigns.

Once you know the value of each of your customers, you can make better data-driven decisions on how much you should spend on your ad campaigns. For example, if your ACV is $200, then your average ad spend should be lower than $200.

Calculating ACV can help your team better understand your overall budget, increase profit insights, and determine how many customers you need to retain to keep your business running.

How to calculate average customer value

For e-commerce, this metric is easy to calculate. To determine your ACV, you will need to first calculate these two metrics:

1. Average order size (AOS): AOS tracks the average amount spent each time a customer places an order on your site. This is calculated by taking your total customer revenue over a given period and dividing it by the total orders performed by these customers. 
2. Average order frequency (AOF): This represents the average amount of orders or transactions placed by each customer. This is calculated by compiling the number of orders and dividing it by the total amount of customers over a given period.  

Once both your AOS and AOF are calculated, you simply need to multiply them both together to determine your ACV.

In other lines of work, you’ll need to find out how many dollars each funnel is converting ($) and how much (%) and add them up. This blog post has a good example of how this works.

To see what it’s like to measure and analyze campaign performance with absolute ease, head on over to your workspace on Adriel and play around with intelligent dashboards powered by cutting-edge ad operations technology. 

Talk to our product specialist today.