Customer Lifetime Value
Customer Lifetime Value (CLV or CLTV) is the total revenue a business can expect to get from a single customer during their relationship.
It is one of the most important customer experience metrics to track. It is typically measured in relation to the customer acquisition cost (CAC) to understand how long it takes to return the money invested in earning a new customer.
The customer lifetime value formula is:
CLV = Average purchase value x Average purchase frequency rate x Average customer lifespan
- Historic CLV is the total profit from all past purchases by a single customer.
- Predictive CLV is used to forecast the duration of a customer relationship and its total value based on historical data.