Measures the total value a customer brings to the business over their entire relationship.
What it Measures ?
How much value one customer brings.
Relevant StakeHolders
Marketing, Finance
Why it Matters ?
Maximizes long-term value of customers.
In-depth Use Case / Real-world Example
CLV estimates the total revenue a customer will generate over their lifetime as a paying customer. For example, if a customer generates ₹1 lakh annually for 5 years, the CLV is ₹5 lakhs. This KPI helps businesses understand the long-term value of customer relationships, including service contracts, repeat purchases, and referrals. In manufacturing, where customers may purchase ongoing maintenance or support services, CLV is a key metric for evaluating the effectiveness of service offerings and customer retention efforts.
Sample Formula
Total Revenue from Customer - Cost to Acquire