Customer Lifetime Value (CLV)

What is Customer Lifetime Value (CLV)?

CLV represents the total revenue a business can expect from a single customer account throughout their relationship. It’s a key metric for understanding customer profitability and guiding acquisition and retention investments.

CLV Calculation

Basic Formula: (Average Purchase Value × Purchase Frequency × Customer Lifespan) - Customer Acquisition Cost

Using CLV

• Acquisition Strategy: Determine how much to spend on acquiring new customers
• Retention Focus: Identify high-value customers for retention programs
• Segmentation: Group customers by value for targeted marketing
• Resource Allocation: Invest more in high-CLV customer segments

Improving CLV

Increase CLV by improving customer retention, encouraging repeat purchases, upselling and cross-selling, and reducing churn through excellent service.