CLV, or Customer Lifetime Value, is a measurement of how valuable a customer is to your business. It’s more than on a transaction-to-transaction basis as it includes the total worth of that customer to your business during their entire relationship. It’s an important figure to know as existing customers are cheaper to keep than trying to attain new ones.
Trying to measure what your business’ CLV is can get pretty complicated, especially if you’re a large business with more intricate products and services. However, there is a basic formula you can use to find what your average CLV is, and this will suit many businesses:
Customer revenue per year
multiplied by
The length of the relationship with the customer (in years)
subtract
The total cost to acquire and serve that customer
= CLV