Customer Lifetime Value represents how “valuable” a customer is to your company in an unlimited period. This metric helps marketers understand a reasonable cost per acquisition. This measurement is particularly significant for businesses with subscriptions or membership-based companies. The CLV is a crucial metric as it costs less to keep an existing customer than it is to acquire a new one. Therefore, increasing the value of your current customers is a great way to drive business growth. Knowing the CLV helps your business develop efficient strategies to acquire new customers and retain the existing ones while maintaining profit margins. The CLV can be measured by identifying customer touchpoints that create value and measuring their revenue and integrating customer history and behaviors to create the customer journey.
At its simplest, the formula for measuring CLV is:
“Customer revenue minus the costs of acquiring and serving the customer = CLV.” (https://www.qualtrics.com/experience-management/customer/customer-lifetime-value/)