Customer Lifetime Value (CLV/CLTV)

What is Customer Lifetime Value (CLV)?

Customer Lifetime Value (CLV or CLTV) is the total revenue a customer generates throughout their entire relationship with your business. It represents the financial value of a customer over time, from their first purchase until they churn.

CLV helps businesses understand how much they can invest in acquiring and retaining customers while remaining profitable.

How to Calculate CLV

Simple CLV Formula:

CLV = Average Revenue Per User (ARPU) × Average Customer Lifespan

More Detailed Formula:

CLV = (Average Purchase Value × Purchase Frequency × Customer Lifespan) - Customer Acquisition Cost

Example:

ARPU: $1,000/month
Average Lifespan: 3 years (36 months)
CLV = $1,000 × 36 = $36,000

CAC:LTV Ratio

The ratio of Customer Acquisition Cost to Lifetime Value is a key indicator of business health:

• 3:1 or higher: Healthy—you earn $3+ for every $1 spent acquiring
• 1:1: Break-even—no profit from customers
• Below 1:1: Unsustainable—losing money on each customer

Factors That Increase CLV

• Retention: Longer customer relationships
• Expansion: Upsells and cross-sells
• Reduced churn: Lower attrition rates
• Higher adoption: More engaged customers stay longer

CLV by Segment

Calculate CLV by customer segment to understand which types of customers are most valuable and should be prioritized for acquisition and retention efforts.