Customer lifetime value (CLV)

Customer lifetime value (CLV), or Lifetime value (LTV), is the total revenue a business can expect from a customer over the entire relationship duration. It represents a crucial metric for understanding clients’ long-term value and making decisions on retention, marketing, and customer service strategies.

The formula to calculate Customer lifetime value (CLV) is:

CLV = (Average Purchase Value) × (Average Purchase Frequency) × (Customer Lifespan)

Where:

• Average Purchase Value is the average amount a customer spends per purchase.
• Average Purchase Frequency is how often a customer makes a purchase over a specific period.
• Customer Lifespan is the average length of time a customer continues to purchase from the business.