Customer Lifetime Value (CLV)

Customer Lifetime Value (CLV) estimates the total revenue a business can expect from a customer over the entire duration of their relationship. It helps measure long-term profitability and guides decisions around acquisition, retention, and resource allocation.

Why CLV matters:

- Identifies high-value customer segments.

- Informs marketing spend and acquisition strategies.

- Helps reduce CAC by focusing on loyal, repeat customers.

- Enables better forecasting and business planning.

How to calculate CLV:

CLV = Customer Value × Average Customer Lifespan

Where:

Customer Value = Average Purchase Value × Purchase Frequency

Average Customer Lifespan = Average time a customer stays active

Example:

A customer who spends $10 daily and stays for 3 years = $10 × 365 × 3 = $10,950 CLV

Ways to boost CLV:

- Offer personalized experiences and product recommendations.

- Use AI-driven tools for intelligent cross-sells and upsells.

- Provide responsive, high-quality customer support.

- Focus on retention with loyalty programs and engagement campaigns.

Understanding and improving CLV helps businesses grow sustainably by maximizing the value of each customer relationship.