Customer Lifetime Value Analysis

Customer lifetime value analysis is used to estimate the total value of customers to the business over the lifetime of their relationship. It helps companies determine how much to invest in customer acquisition and retention, as well as identify the most valuable customers to prioritize for retention efforts.

By analyzing customer lifetime value, companies can identify the most effective marketing channels and campaigns for acquiring high-value customers, as well as develop targeted retention strategies to keep those customers engaged and loyal.

For the Customer Lifetime Value analysis task, we need a dataset based on customers’ relationships with the business. I found an ideal dataset for this task. You can download the dataset from here

Few glimpses of EDA:

1. Distribution of Acquisition Cost:

• There are two main groups of acquisition costs, showing different customer segments.
• Most customers have lower acquisition costs, with a few having much higher costs.
• The most common acquisition cost is around 10 units.

2. Distribution of Revenue:

• The distribution is slightly skewed to the right, indicating that a smaller number of customers generate significantly higher revenue.
• There is a slight cluster of customers in the 500-1000 revenue range, indicating a segment with lower revenue.
• The most common revenue range is between 3500 and 4000 units.

3. Customer Acquisition Cost by Channel:

• Paid advertising is the most expensive channel, with a cost significantly higher than the others.
• Email marketing is the least expensive channel, indicating it might be a more cost-effective option for acquiring customers.

4. Conversion Rate by Channel:

• Social media is the most effective channel for converting customers, with the highest conversion rate.
• Paid advertising is the least effective channel, with the lowest conversion rate.

5. Total Revenue by Channel:

• Email marketing generates the highest proportion of revenue at 27.3%.
• There isn't a significant difference in revenue generation between the remaining channels, suggesting they all contribute relatively equally to the overall revenue.

6. Return on Investment (ROI) by Channel:

• Email marketing has the highest ROI, indicating it is the most profitable channel in terms of return on investment.
• Paid advertising has the lowest ROI, suggesting it might be less efficient in generating returns compared to other channels.

7. Customer Lifetime Value by Channel:

• Referral and social media channels have the highest CLTV, indicating that customers acquired through these channels are more valuable in the long run.

8. CLTV Distribution by Channel:

• The CLTV distributions for referral and social media channels overlap, indicating similar values between these channels.
• The median CLTV for social media is slightly higher than for referral, suggesting social media customers generally have a higher lifetime value.

Conclusion

• Customer lifetime value analysis is used to estimate the total value of customers to the business over the lifetime of their relationship.
• It helps companies determine how much to invest in customer acquisition and retention, as well as identify the most valuable customers to prioritize for retention efforts.

🚀 About Me

Hi, I'm Amay Jaiswal! 👋

I am a Data Analytics Enthusiast and Data science practitioner

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