Glossary / Customer lifetime value (CLV)
What is Customer lifetime value (CLV)?
Customer lifetime value is the total profit you expect from one customer over the whole relationship. It tells you what a new customer is worth.
A coffee shop customer spends 5 dollars a visit, comes twice a week, and stays two years. That is roughly 1,000 dollars of revenue from one person. Lifetime value asks that question for your business and answers it in profit, not revenue.
The simple version is average order value, times how often they buy in a year, times how many years they stay, times your margin. Rough numbers are fine. You want a ballpark, not a decimal.
Once you know it, you know what you can afford to spend to win a customer. It also makes retention obvious. Keeping existing customers one more year usually costs less than replacing them.
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