Bad Churn: Why Your CLV Needs an Ending Multiplier

CLV has been a business cornerstone for decades, but in a world shaped by considerate consumption and data transparency, the calculation is seeming outdated.

Customer lifetime value (CLV) dates back to the 60s. But it wasn’t formally documented until the late 1980s, in the book Database Marketing: Strategy and implementation. It was greatly influenced by earlier marketing and direct marketing, especially a technique called the RFM method (Recency, Frequency, Monetary), which aimed to quantify a customer’s long term worth beyond a single transaction.

CLV has two standard applications depending on your type of business:

Transactional business, like retail

CLV = Average Purchase Value X Average Purchase Frequency X Average Customer Lifespan

Subscription based business like SaaS or Membership business

CLV = Average Revenue per user (ARPU) X Gross Margin / Churn Rate

The Failure of the Traditional Model

The CLV method has its origins in a different business landscape, before peak end rule psychology, long before climate change had been spotted, or before ethical consumption had gone mass market, or cookies and one click shopping. Now consumers are more concerned about consequences, and businesses have the ability to observe nuanced current behaviour and predict future actions.

The major criticism of the CLV model is its focus on the immediate term. It fails to see the influence of bad endings on customer value. A business might have a high CLV, yet an unhappy user base that feels trapped and exposed. That arguably would be worse for the business over the mid to long term.

Even beyond the direct consumer focus, businesses are witnessing an increase in legal expectations around businesses activities relating to data and ESG. Connecting these to customer value can be eased if we look towards multipliers that consider the long term customer relationship.

The end of the customer experience influences the long term memory, business sentiment, brand equity, and opportunity of a second sales cycle. These in turn significantly influence the business. Recognising this requires updating the equation.

Introducing the Ending Multiplier 

We need a multiplier for the CLV that recognises the impact of the end. Adding an Ending Multiplier to the traditional CLV represents the quality of the off-boarding experience.

A good ending embeds the best of memories, builds sentiment, solidifies brand equity, and increases the likelihood of a second sales cycle. Conversely, a bad ending destroys value because it erodes brand equity, heightens bad memories, lowers sentiment, and makes it harder to convert the customer for a second sales cycle.

This multiplier represents the quality of the off-boarding experience and transforms the calculation into a more accurate measure of value:

CLV True = CLV (Baseline) X Ending Multiplier

If your ending is overlooked or poorly executed, your Ending Multiplier is less than 1. Your bad ending is actively destroying value, forcing you to spend more to acquire or re-acquire customers later.

If your ending is strategically designed (what we call Endineering), your Ending Multiplier is greater than 1. Your good ending is a strategic asset, actively creating future value by securing good sentiment and making the next cycle easier.

An Endineering Audit

To move beyond guesswork, we break down these factors into an inquiry about the business's current product off-boarding experience to calculate the Ending Multiplier Score (EMS).

1. Strategic Design. 

Q: Does your off-boarding align with your brand characteristics and mission? 

• The ending is designed to align with the brand's values (ex: transparency, bold, dynamic, honest) (+1). 

• The ending is merely the most convenient way to remove an account. (-1)

2. Customer Clarity.

Do you clearly signpost the phases a consumer goes through to off-board? 

• The process is clear, making the transition as smooth as possible. (+1)

• The process is confusing, focusing only on legal or technical steps. (-1)

3. Empowerment & Ethics

Is the consumer truly empowered to leave, or are there deceptive patterns? 

• The customer is informed enough to make the best decision for their needs. (+1)

• There is significant pressure to stay ("dark patterns"). (-1)

4. Brand Voice. 

Does the customer hear the language of your brand guiding them through the last moments?

• The language is emotional and purposeful, maintaining the customer bond. (+1)

• The language is cold, legalistic, or barren of emotion and meaning. (-1)

5. Relationship Value.

Is the relationship treated as a potential re-engagement, or simply as a final loss? 

• The ending is managed to secure good sentiment, easing future conversion. (+1)

• The ending is overlooked, leading to poor sentiment and harder future conversion. (-1)

Conclusion: The Strategic Asset

By breaking down the off-boarding experience into these quantifiable factors, a business can get a concrete score that determines their Ending Multiplier. A negative score means their current CLV calculation is artificially inflated and they are losing long-term value.

The goal of Endineering is to provide the clearest possible transition, allowing the customer to make the best decision for their needs. By investing in the end, you are not just managing churn—you are strategically designing a positive memory that guarantees a better beginning for your next sales cycle. The end is no longer a cost centre; it is a strategic asset.