What is "Customer Lifetime Value (CLV)" meaning?

Customer Lifetime Value (CLV) is a business metric that helps companies predict the total revenue they can expect from a customer over the course of their relationship. It takes into account factors like purchase frequency, average order value, and customer retention rate.

Example

"A clothing retailer with a CLV of $300 means that, on average, each customer will generate $300 in revenue over the course of their relationship with the brand."

How is "Customer Lifetime Value (CLV)" used in business?

In business, CLV is used to determine how much money a company should spend on acquiring and retaining customers. It helps prioritize strategies to improve customer loyalty and maximize long-term profits.

Pro Tip

If your CLV is higher than your Customer Acquisition Cost (CAC), your business model is likely sustainable. Consider strategies to further increase customer retention.

Related Terms

Customer Acquisition Cost (CAC), Retention Rate, Churn Rate, Customer Segmentation