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
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