The total revenue expected from a customer over time.
NOIR & BLANCO COMMUNITY
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Customer Lifetime Value (CLV) is an estimate of the total value a business expects to receive from a customer throughout the entire customer relationship. It helps businesses understand how valuable a customer can be over time rather than looking at only one purchase.
A basic revenue-based CLV formula is:
CLV = Average Purchase Value × Purchase Frequency × Customer Lifespan
For example, if a B2B customer spends an average of ₹50,000 per year and remains a customer for 5 years, the estimated revenue-based CLV is ₹2.5 lakh.
CLV can help businesses:
For B2B businesses, CLV can be particularly useful because customers may place large, recurring orders and maintain relationships for several years.
More advanced CLV models may account for profit margins, retention rates, churn, discounts, acquisition costs, and predicted future behavior. Therefore, CLV is an estimate, and its accuracy depends on the quality and completeness of the underlying customer data.