Calculating CLV

Customer lifetime value (CLV) is a metric used to describe how much money a company can expect to make overall from a typical customer during the duration that person or account stays a customer. CLV is the total amount a company makes from a typical customer during the term of that customer’s relationship with the company and it is used in marketing to forecast the net profit that will be generated over the course of a customer’s entire future relationship.

Knowing the CLV of our clients is crucial since it informs our choices regarding how much money to spend on attracting new clients and keeping existing ones. The simplest way to calculate CLV is by multiplying the average value of a purchase by the number of times the customer will make a purchase each year by the average length of the customer relationship (in years or months).

Numerous benefits can be derived from calculating the CLV of various clients, but business decision-making is the key...