Customer Lifetime Value: A Definition and an Example to Explain It Better

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Customer lifetime value expresses the economic benefit that a company expects to accrue as long as a person remains its customer . This is the basic definition, which can however become very complicated if we decide to go beyond the basic calculations (which only consider revenue) to also take into account the gross margin and operating expenses (and in this case it becomes necessary to carry out more complex equations). For simplicity, in this article we will refer generically only to revenue .

We said that customer lifetime value is a measure of the revenue that bangladesh whatsapp resource a customer has generated during the entire relationship with a company. Now, this customer can be considered in his anagraphic reality (and is therefore unique and specific) or embodied in a broader segment . In this second case we speak of a "typical customer" or "average customer" . In any case, whether it is a real person (with his distinctive unrepeatable profile) or an abstraction (useful for describing structured situations or over extended periods of time), the comparison between CLV and customer acquisition cost is always a quick method for estimating the profitability of a customer and the long-term growth potential of the company.

For a company, only an inversely proportional relationship between customer acquisition cost (CAC) and customer lifetime value (CLV) – where the latter number is higher – can be considered truly advantageous. The less it costs to acquire a single customer, the higher the overall value that the customer represents and the greater the profit that the company will be able to make.