What is Customer Lifetime Value?

Customer Lifetime Value (CLV or LTV) is the total net revenue an average customer generates over the entire relationship with your business. CLV is one of the most strategic metrics in marketing, because it determines the maximum acquisition cost per customer.

How do you calculate CLV?

A simple calculation: CLV = average order value x purchase frequency x average customer lifespan in years. A more advanced calculation also takes margin, churn rate and the time value of money into account.

CLV and maximum acquisition cost

If a customer’s CLV is 2,000 euros and your gross margin is 40%, your CPA can be at most 800 euros to stay profitable. CLV lets you decide rationally how much you can spend per new customer on SEA, SEO and cold email.

Raising CLV

Through retention programmes, upselling and cross-selling, loyalty offers and an excellent customer experience. Doubling your CLV effectively doubles what you can afford to spend on winning each customer.

What is the difference between CLV and LTV?

Same metric, different abbreviation. CLV (Customer Lifetime Value) and LTV (Lifetime Value) are used interchangeably.

What is the fastest way to raise CLV?

Lowering churn through better onboarding and proactive customer follow-up. More at developers.google.com/search.