What is CLV (Customer Lifetime Value)?

Client Lifetime Value (CLV) predicts future net profit from a customer connection. It evaluates a customer's lifetime worth to a company, making it important for subscription-based or recurring revenue organizations.

A popular strategy to compute CLV is to determine the average revenue per customer per month (ARPA), multiply that by the average customer lifespan (in months), and subtract the average customer acquisition cost (CAC).

CLV helps firms assess client acquisition and retention value. High CLVs indicate long-term profitability, whereas low CLVs indicate lower value. Understanding CLV helps businesses decide how much to spend on client acquisition and retention and how to allocate resources to boost CLV.

CLV is a prediction influenced by customer behavior, market conditions, and corporate performance.