Customer Lifetime Value (CLV)

A Definition to a Common Term Related to Web Analytics

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Term: "Customer Lifetime Value (CLV)"


Customer Lifetime Value (CLV) is a metric that represents the total amount of revenue or profit a business can reasonably expect from a single customer account throughout the business relationship. The calculation of CLV involves estimating the net profit attributable to the entire future relationship with a customer, taking into account factors such as purchase frequency, average order value, customer retention rates, and profit margins. CLV is a crucial metric in understanding customer value and making informed decisions about marketing, sales, product development, and customer support strategies. It helps businesses allocate their resources efficiently by identifying high-value customers and tailoring their approach to maximize the value of these relationships. Additionally, CLV is instrumental in calculating the return on investment for customer acquisition and retention efforts, guiding businesses in how much they should invest in acquiring new customers and retaining existing ones. By focusing on increasing the CLV, companies can enhance customer satisfaction, loyalty, and profitability over the long term, fostering sustainable growth and competitive advantage.

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