Customer Lifetime Value (CLV)
The Customer Lifetime Value (CLV) is a key metric in marketing that describes the total financial value of a customer over the entire duration of the business relationship. It shows how much revenue or profit a company generates on average from a single customer during their active period.
Unlike short-term performance metrics, the CLV considers the long-term contribution of a customer. This allows companies to better assess how much budget they should reasonably invest in acquisition, customer service, or retention measures.
An example: A streaming provider analyzes that an average customer pays monthly over three years and books additional premium options. The Customer Lifetime Value results from the sum of these recurring revenues, minus the costs for acquisition and support.
The advantage of the CLV is that companies can align their marketing and sales strategies more efficiently. Instead of focusing solely on short-term sales, attention is directed toward long-term profitability. This makes it possible to identify and specifically nurture particularly valuable customer segments.
For companies, the Customer Lifetime Value is an indispensable management tool. It helps allocate resources more effectively, prioritize profitable customer groups, and ensure sustainable growth.