E-Commerce Dictionary
Customer Lifetime Value (CLV)
Definition
A prediction of the net profit attributed to the entire future relationship with a customer.
Deep Dive
Customer Lifetime Value (CLV), sometimes referred to as LTV, is a forward-looking metric that predicts the total net profit a business can expect to generate from an entire future relationship with a customer. It's a critical indicator of long-term business health, moving beyond the revenue from a single transaction to estimate the total economic worth of a customer over their entire engagement with the brand. CLV takes into account repeat purchases, up-sells, cross-sells, and the duration of the customer relationship, providing a holistic view of customer profitability.
Examples & Use Cases
- 1A subscription streaming service estimating the total revenue from a customer over their average 3-year subscription period
- 2An e-commerce brand forecasting the total spending of a loyal customer who makes several purchases a year over a decade
- 3A coffee shop predicting the aggregate profit from a regular customer who buys a coffee every weekday for five years
Related Terms
Customer Acquisition Cost (CAC)Customer RetentionAverage Order Value (AOV)