Marketing 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), also known as LTV, is a prediction of the net profit attributed to the entire future relationship with a customer. Rather than focusing on a single transaction, CLV quantifies the total revenue a business can reasonably expect from a single customer throughout their engagement with the company. It's a forward-looking metric that takes into account repeat purchases, subscriptions, and even potential referrals, making it a cornerstone for long-term strategic planning and sustainable business growth.
Examples & Use Cases
- 1A coffee shop calculates that a regular customer who buys a latte every weekday for 5 years, spending $4 per day, has a CLV of approximately $5,200 ($4 x 5 days/week x 52 weeks/year x 5 years).
- 2A SaaS company determines that an average enterprise client stays subscribed for 3 years at $500/month, yielding a CLV of $18,000 ($500 x 12 months x 3 years).
Related Terms
Customer Acquisition Cost (CAC)Retention RateAverage Revenue Per User (ARPU)