Customer Lifetime Value (CLV) estimates the total revenue a business can expect from a single customer over the entire duration of their relationship. It helps brands understand long-term customer value and inform acquisition and retention strategies.
Calculation: CLV = Average Purchase Value × Purchase Frequency × Customer Lifespan
Example: If a customer spends $50 per purchase, buys 4 times per year, and remains a customer for 5 years, the CLV is $1,000.