Customer Lifetime Value (CLV)
The total revenue a business can expect from a single customer over their relationship.
Definition
Customer Lifetime Value predicts the total revenue a customer will generate throughout their relationship with your business. It factors in purchase frequency, average order value, and customer lifespan to inform acquisition spending, retention investments, and customer segmentation.
Why It Matters
CLV helps determine how much to spend acquiring customers profitably. Understanding which customer segments have highest lifetime value guides targeting, product development, and resource allocation for maximum long-term revenue.
Examples in Practice
A subscription service calculates CLV as average monthly revenue times average customer lifespan in months. An e-commerce brand discovers customers acquired through referrals have 2x higher CLV than paid ads. A SaaS company uses CLV to justify higher acquisition costs for enterprise customers.