Customer Lifetime Value

What is Customer Lifetime Value?

The value added by a customer over their lifetime to a business. Deriving value from an existing customer is better than acquiring a new one.

How to Calculate CLV?

CLV is the total amount of money a customer will pay to a company during their lifetime.

CLV = ARPU/Revenue or Customer Churn Rate

  • ARPU or Average Revenue Per User is the average amount of money paid by a customer.

  • Customer Churn Rate is the rate at which a customer stops making recurring purchases.

  • Importance of the Metric:

  • Customers are quite costly to acquire, and a customer becomes valuable only when they stay with a business for long. Which means, the higher the CLV, the greater the profits.

  • A growing CLV indicates a better retention of customers and a move toward sustainable operations.