Customer Lifetime Value (CLV) is a calculation that estimates the total income a business can expect to earn from a customer over the entire customer's “lifetime” or relationship with the business. CLV provides insight into how valuable a customer is to your business over time and helps make informed marketing and customer service decisions.
Usecases for CLV:
Marketing strategy: CLV helps determine how much a business should spend on acquiring and retaining customers. If CLV is high, it can justify higher customer acquisition costs (CAC).
Customer retention: By understanding CLV, companies can focus on strategies to increase customer relationship duration and purchase frequency, such as loyalty programs and customer service initiatives.
Segmentation and targeting: CLV provides insight into which customer segments are most valuable, enabling companies to tailor their offerings and marketing efforts.
