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Customer lifetime value (CLV or LTV) is the total value a business expects from one customer over the whole time they buy from it. A simple version multiplies average order value by purchases per year and by years as a customer. A stricter version counts gross margin, not revenue.
In short
A worked example, not a benchmark: a customer who spends $200 a time, buys three times a year and stays for four years is worth $2,400 in revenue. At a 30% gross margin the value to the business is $720. That margin figure is what to compare with the cost of winning the customer.
Use lifetime value to set a ceiling on what you can pay to acquire a customer, and to see which customers or channels are worth the most. Be careful with young businesses: with little history, any lifetime figure is a forecast, so label it as one.
Email and follow-up are common ways to raise it; see our email and follow-up services.
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