What is CLV? Customer Lifetime Value Explained For Beginners - Formula, Example, Definition

Customer Lifetime Value is the average monetary value of each customer to your business. CLV takes into account how much a unique customer is expected to spend with your business. It is an important metric so you know how much new customers are worth to your business over their lifespan as a customer.

We have the customer lifetime value formula, definition, examples in marketing, calculator, and more. You can easily learn everything you need to know about CLV by watching this video.

Customer Lifetime Value Formula = Average Order Value * Average Purchase Frequency * Average Customer Lifespan

CLV Example #1:

A Marketing tool costs $50/month. The average customer uses the tool for 16 months. What is the CLV?
Average Order Value = $50
Average Purchase Frequency = 1/month
Average Customer Lifespan = 16 months
CLV = 50 * 1 * 16
CLV = $800

Customer Lifetime Value Example #2:

A running shoe company has customers that buy 2 pairs of shoes on average per year. Customers stay loyal for 2 years on average and spend $128/order. What is the CLV?
Average Order Value = $128
Average Purchase Frequency = 2/year
Average Customer Lifespan = 2 years
CLV = 128 * 2 * 2
CLV = $512

[shpion]

Very good explanation for the basic concept of CLV. As you for sure know but probably decided to omit in order to keep it simple is that
- it is best to use average profit per customer, not revenue
- value over multiple periods has to be discounted by the applicable discount rate, e.g. interest rate

[trulyyours]

Your explanation is amazing! I'm currently doing my second degree in Tourism Administration, I'm 45 yrs old and doing tge degree in my home country in Greek. My whole background is in theoritical studies (Spanish Language and Culture) but I'm mesmerized by Economics although I find it complicated since I hear everything for the first time. I've worked in Tourism, to my amazement, I'm excellent in sales and I'd love to open up my own business abroad (Greece is such a tiny market and I wouldn't even consider it). I'm in my second year in College. We just had a semester of basic Marketing and I loved it. What kind of Master's Degree do you think would be useful/relevant for a woman who wants her own business in Tourism? Nothing too complicated.
Also, please, consider speaking a bit slower since your audience is people from all over the world and we need some time to grasp the meaning of the words. (I know I can adjust the velocity, but it just doesn't sound natural.) Thank you for your time!

[thawzinken]

AOV = Sales / Order No. ?
Avg Purchase Frequency = Avg Order in Month?

Explain me more.

[RodneyVillegas-ok]

Allen William Rodriguez Anthony Clark Brenda

[ЭлинаБерестова]

Williams Mark Gonzalez Thomas Moore Carol

[SameerBehlim-txzy]

Hi very very helpfull first of all thank you so much
But i have question i do job as digital media executive in fashion brand i want to know about how can i create dashboard for LTV

[mashairahmed]

it all about simplicity ..thank you ..finally get
it

[mhishamyakoob]

Is the CLV concept applicable to both B2C & B2B businesses?

[prettysmartpresius]

Is unique customers just ... A customer of yours?

[ckren]

Everyone can read that shit.... Better mute the audio