Customer lifetime value (CLV) is the predicted total revenue a business expects to earn from a single customer over the entire course of their relationship. It helps companies understand how valuable a customer is beyond a single purchase and guides decisions around customer acquisition, retention, and support.

CLV is especially valuable in subscription-based and SaaS businesses, where customer retention directly impacts long-term growth and profitability.

Why CLV matters:

• Helps determine how much a business can afford to spend on acquiring a customer (CAC)
• Highlights the value of reducing churn and increasing retention
• Informs upsell and cross-sell strategies
• Helps identify high-value customer segments

Basic CLV formula:

CLV = Average purchase value × Purchase frequency × Customer lifespan

Example:

If a customer pays $100 once a month and stays for 24 months, their CLV is $2,400 ($100 x 1 x 24 = $2,400).