What is Customer Lifetime Value (CLV)?

Customer Lifetime Value (CLV) is the total revenue a customer is expected to generate for a business throughout their entire relationship. It considers purchase frequency, average order value, and the typical duration of the customer relationship.

When to calculate Customer Lifetime Value?

CLV should be calculated when planning marketing budgets, determining acceptable acquisition costs, segmenting customers for targeted campaigns, and making decisions about customer retention investments.

When might CLV calculations be challenging?

CLV can be difficult to calculate accurately for new businesses without historical data, subscription models with high churn variability, or businesses with very long sales cycles and infrequent purchases.

What is the importance of Customer Lifetime Value in Marketing?

CLV helps justify marketing spend, guides customer acquisition strategies, enables better customer segmentation, informs retention efforts, and provides a framework for making data-driven decisions about customer relationships and marketing investments.