Customer Lifetime Value (CLV or LTV) measures the total revenue a business expects to generate from a single customer throughout the entire relationship.
Instead of focusing on one transaction, CLV looks at long-term value.
Basic formula:
Average Order Value × Purchase Frequency × Customer Lifespan
Example:
If a customer spends €100 per order, purchases 4 times per year, and stays active for 3 years, their CLV is €1,200.
Why it matters
- Helps determine how much you can afford to spend on acquisition
- Supports value-based bidding strategies in platforms like Google Ads
- Encourages long-term growth instead of short-term ROAS optimization
Businesses with strong retention can justify higher CPA targets because the long-term value offsets initial acquisition costs.
In short: CLV measures the total long-term value of a customer, not just the first purchase.