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Glossary > Customer Lifetime Value (CLTV or CLV)
Customer Lifetime Value (CLTV or CLV)
Customer lifetime value (CLV or CLTV) is the total sum of money a company receives from a customer over their lifetime. It is often used in the context of customer retention, where it is the difference between a customer’s lifetime value and the cost of acquiring them.
It’s an important metric for businesses because it helps them determine how much to spend on acquiring new customers and what they can spend on existing ones.
There are many ways to calculate CLV, however the basic formula is:
CLV = Average Annual Revenue per Customer / Average Lifetime of Customer
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