Glossary
Customer lifetime value
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Customer lifetime value (CLV or LTV) is the total value, usually measured as profit or margin and discounted to today, that a business expects to earn from a customer over the whole relationship.
A widely cited review by Gupta and co-authors frames marketing's job as maximising CLV and customer equity, the sum of the lifetime values of a company's customers. It surveys models used to segment customers and to split budgets between acquisition, retention and cross-selling (Gupta et al., Journal of Service Research, November 2006). The simple version multiplies margin per period by the chance the customer stays, period by period, and discounts future periods.
Advertising uses CLV to decide how much a new customer is worth paying for. A brand that knows a subscriber is worth $220 can accept a cost per acquisition well above the first order's margin. Retail media networks now report proxies. Amazon's long-term sales metric adds a projection of the next 12 months of value to immediate sales (Amazon Ads, accessed 9 November 2026). Chewy's "LTV ROAS" links campaigns to later Autoship orders; Chewy says 84% of its net sales come from Autoship, a company claim (Chewy Ads, accessed 9 November 2026).
Example: A customer earns $120 of margin a year, renews with 60% probability each year, and future years are discounted at 10%. Three-year CLV is $120 + $120 × 0.6 ÷ 1.1 + $120 × 0.36 ÷ 1.21, or about $221.