What is Customer Lifetime Value (CLV)?
Customer Lifetime Value (CLV) is a forecasting metric used to determine the long-term value of a customer to a business. Rather than focusing solely on short-term transactions, CLV evaluates how much revenue a single customer is expected to generate over the entire span of their engagement with a company. This includes all future purchases, renewals, upsells, and referrals that may occur as a result of that relationship.
For example, a client who spends $100 per month on services for five years would have a CLV of $6,000, assuming steady engagement. CLV helps businesses segment high-value customers, prioritise retention strategies, and make more informed marketing and service investment decisions.
Why Customer Lifetime Value Matters
Understanding CLV allows contact centres and service-driven organisations to shift focus from purely transactional KPIs to more strategic, relationship-based goals. It supports smarter budgeting, improves customer targeting, and encourages loyalty-building efforts that align with long-term profitability. High CLV customers are typically more engaged, require less acquisition cost over time, and are more likely to act as brand advocates.
Related Terms
- Net Promoter Score (NPS)
- Customer Satisfaction (CSAT)
- Retention Rate
- Churn Rate
- Customer Intelligence