In marketing, customer lifetime value (CLV) (or often CLTV), lifetime customer value (LCV), or user lifetime value (LTV) is a prediction of the net profit attributed to the entire future relationship with a customer. The prediction model can have varying levels of sophistication and accuracy, ranging from a crude heuristic to the use of complex predictive analytics techniques.
Customer lifetime value (CLV) can also be defined
as the dollar value of a customer relationship, based on the present value of the
projected future cash flows from the customer relationship. [1]
Customer lifetime value is an important concept in that it encourages firms to
shift their focus from quarterly profits to the long-term health of their customer
relationships. Customer lifetime value is an important number because it
represents an upper limit on spending to acquire new customers.[2]
For this reason it is an important element in calculating payback of
advertising spent in marketing mix modeling.
One of the first accounts of the term Customer
Lifetime Value is in the 1988 book Database Marketing, which includes
detailed worked examples.[3]
Early adopters of Customer Lifetime Value models in the 1990s include Edge
Consulting and Brand Science.