CLVT

The Customer Lifetime Value (CLTV) is an estimate of the total amount a customer will spend on a company's products or services throughout their relationship with it. This indicator is essential for understanding the long-term profitability of a customer. A high CLTV means that the customer generates more revenue for the company in the long term.

How does CLTV work?

CLTV is calculated by multiplying the average value of a customer's transactions by the purchase frequency and by the average duration of the customer relationship. If a customer spends an average of €50 per month and remains loyal for 3 years, the CLTV will be €1,800 (€50 x 12 months x 3 years).

Concrete example

Imagine you manage an online subscription service where each customer pays €20 per month. If, on average, your customers stay subscribed for 2 years, the CLTV of each customer will be €480 (€20 x 12 months x 2 years). This means that, over the course of the relationship, each customer brings you €480 on average.

Why is CLTV important?

CLTV is a key indicator for business profitability. Knowing the CLTV helps better understand how much you can spend to acquire new customers while remaining profitable. If the Customer Acquisition Cost (CAC) is lower than the CLTV, your business is in a good position. If the CAC exceeds the CLTV, this indicates that acquiring customers costs more than what they bring in over the long term, a potentially concerning sign.

Want to optimize your customers' CLTV?

If you want to improve your customers' CLTV or learn more about how to calculate and optimize it, contact us through the contact form on our website. We'll be happy to help you maximize your customers' long-term profitability.