Customer lifetime value is a metric that represents the total net profit a company expects to earn from a customer over the duration of their relationship. Calculating CLV helps businesses determine the financial value of customers and guides decision-making regarding acquisition, retention, and marketing resource allocation. Equation: CLV = (Average Purchase Value * Purchase Frequency) * Customer Lifespan. Example: A subscription-based fitness app calculates the CLV of its average customer to prioritize retention strategies for its most valuable users.
