Marketing, sales and customers
Customer lifetime value (CLV)
- Marketing, sales and customers
Definition
An estimate of the total value a customer brings to a business over the whole relationship, measured in revenue or, better, in profit.
Also called
CLV, Customer lifetime value
Example
In a deliberately simplified scenario, €50 annual contribution margin retained for three years gives €150 before acquisition cost and discounting.
See how it works
Illustrative undiscounted contribution = €150. Real CLV depends on retention, margins, timing and modelling assumptions.
Check your understanding
Common mistake: Revenue per customer is not automatically profit or customer lifetime value.
Why should a CLV estimate state its assumptions?
Show explanation
Retention, contribution margins, discounting and time horizon strongly affect the result.
For your role
Choose your role to see what this term means in your work.
Why it matters
It shows how much it is worth spending to win and keep a customer, and which customers to prioritise.
Where it is used
Marketing strategy, account planning and pricing. Used by marketing analysts, account managers, customer success and finance.
How to calculate it
CLV = average value per customer per year × expected years as a customer
Profit-based CLV = average revenue per customer per year × gross margin × expected years
Worked example
Raket Parts B.V. customers who bought in January to September 2025 spent €127,936 each on average, about €170,581 a year. At a gross margin of 67.7% that is about €115,483 of gross profit a year. If a customer stays an illustrative 5 years, profit-based CLV is about €577,000, before discounting.
The average hides a skewed base: the top 10 customers bring three quarters of revenue, so CLV by segment is more useful.
Raket Parts B.V. is a fictional company created for Insyt.
Definitions vary. Some use revenue and others profit; lifespan assumptions and discounting differ widely. Check how your organisation calculates it.