Definition

CLV is one of the key statistics that are tracked in customer experience. It represents the total amount of money a customer is likely to spend on your products. CLV uses data from your accounting and Business Intelligence and is the key to successful financial planning (bottom-up approach). This metric tells us how much a customer spends over the entire time they shop with us. From an accounting perspective, it is therefore a cash flow projection that will greatly facilitate long-term financial planning.

Application

CLV Calculation Formula:  

CLV = (average purchase value * number of times a customer purchases each year * average length of customer relationship in years)

CLV allows you to measure the financial impact of marketing campaigns , initiatives and other activities. CLV measures the value a person brings to a business in all their interactions over time - not just in a single transaction. By focusing on this metric, it's a sure-fire way to attract more customers and ensure ongoing interaction with them.