Customer lifetime value, or CLV or LTV, is an estimate of the total revenue or profit a business expects from a customer over the entire time they remain a customer, not just their most recent purchase.‍

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Why it matters

Looking at a single transaction can make a customer look low-value when they're actually one of the most valuable relationships a business has, since the real value comes from years of repeat purchases, not one order. This reframes support decisions too, the resources worth spending to retain a customer or fix a bad experience should scale with what that relationship is actually worth over time, not the size of the ticket in front of an agent.

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‍How it's calculated

A common simplified formula multiplies average purchase value by purchase frequency and by average customer lifespan, though more advanced models also subtract acquisition and retention costs to get a net figure. Retention rate feeds directly into this, since a longer average lifespan mathematically raises CLV, which is why churn reduction and CLV growth are usually treated as the same underlying goal from two different angles.