{"id":63935,"date":"2023-04-26T18:26:55","date_gmt":"2023-04-26T18:26:55","guid":{"rendered":"https:\/\/mailrelay.com\/glossary\/customer-lifetime-value-clv\/"},"modified":"2026-10-07T10:22:09","modified_gmt":"2026-10-07T10:22:09","slug":"customer-lifetime-value-clv","status":"publish","type":"glossary","link":"https:\/\/mailrelay.com\/en\/glossary\/customer-lifetime-value-clv\/","title":{"rendered":"Customer Lifetime Value (CLV)"},"content":{"rendered":"\n

Customer lifetime value (CLV) is the total value a customer brings to a business over the entire time they buy from it.<\/strong> It answers a simple question: how much is a customer really worth?<\/p>\n\n

It doesn’t look at a single sale, but at the whole relationship. A customer who spends \u20ac30 a month for three years is worth much more than one who buys once for \u20ac200 and never comes back.<\/p>\n\n

What does CLV mean?<\/h2>\n\n

Customer lifetime value<\/em> means “the value of a customer over their whole life as a customer”. It’s also written as CLTV<\/strong> or LTV<\/strong>, and it’s sometimes called lifetime customer value<\/strong>.<\/p>\n\n

There are two ways to look at it:<\/p>\n\n

Type<\/th>What it measures<\/th>What it’s for<\/th><\/tr><\/thead>
Historical<\/td>What the customer has already spent<\/td>Knowing who your best customers are today<\/td><\/tr>
Predictive<\/td>What the customer is expected to spend in the future<\/td>Deciding how much to invest in acquiring and looking after customers<\/td><\/tr><\/tbody><\/table><\/figure>\n\n

Why calculate the value of a customer?<\/h2>\n\n

To know how much you can invest in acquiring a customer.<\/strong> If each one brings you \u20ac150 in profit, it makes no sense to pay \u20ac200 to get them.<\/p>\n\n

To prioritize.<\/strong> It shows you which customers, channels or products bring longer relationships.<\/p>\n\n

To measure loyalty.<\/strong> If this value goes up, your customers are buying more or staying longer.<\/p>\n\n

To make level-headed decisions.<\/strong> A campaign that isn’t profitable on the first sale can be profitable over the course of the relationship.<\/p>\n\n

CLV formula<\/h2>\n\n

The simplest formula, and the one most used by small businesses, is this:<\/p>\n\n

CLV = average purchase value \u00d7 purchases per year \u00d7 years as a customer \u00d7 margin<\/strong><\/p>\n\n

Figure<\/th>How to calculate it<\/th><\/tr><\/thead>
Average purchase value<\/td>Revenue \u00f7 number of orders (this is the average order value<\/a>)<\/td><\/tr>
Purchases per year<\/td>Orders per year \u00f7 number of customers<\/td><\/tr>
Years as a customer<\/td>Average time a customer keeps buying<\/td><\/tr>
Margin<\/td>Percentage of profit on each sale<\/td><\/tr><\/tbody><\/table><\/figure>\n\n

If you don’t apply the margin, you get the value in revenue, not in profit. It’s useful, but it can be misleading if your margins are low.<\/p>\n\n

\"Infographic<\/figure>\n\n

Calculation example<\/h2>\n\n

An online cosmetics store has these figures:<\/p>\n\n

Average purchase value:<\/strong> \u20ac40.<\/p>\n\n

Purchases per year:<\/strong> 4.<\/p>\n\n

Years as a customer:<\/strong> 3.<\/p>\n\n

Margin:<\/strong> 30%.<\/p>\n\n

The calculation is 40 \u00d7 4 \u00d7 3 = \u20ac480 in revenue per customer. With a 30% margin, the CLV is \u20ac144 in profit<\/strong>.<\/p>\n\n

With that figure, the store knows it can spend up to about \u20ac50 to acquire a customer and still make money. That spend is the customer acquisition cost (CAC)<\/a>.<\/p>\n\n

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Get your customers to buy again<\/strong><\/p>\n\n\n\n

Automate welcome, post-purchase and reactivation emails with Mailrelay to increase the value of every customer.<\/p>\n\n\n\n

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Create a free account<\/a><\/div>\n<\/div>\n<\/div><\/div>\n\n

The CAC ratio you should keep an eye on<\/h2>\n\n

This metric only makes sense if you compare it with what it costs you to acquire that customer:<\/p>\n\n

Ratio to CAC<\/th>What it means<\/th><\/tr><\/thead>
Less than 1:1<\/td>You lose money on every new customer<\/td><\/tr>
1:1 to 3:1<\/td>You earn little: review your costs or prices<\/td><\/tr>
3:1 or more<\/td>A common benchmark for a healthy business<\/td><\/tr>
Well above 5:1<\/td>You may be investing too little in growth<\/td><\/tr><\/tbody><\/table><\/figure>\n\n

In the example, \u20ac144 of value against \u20ac50 of CAC gives a ratio of close to 3:1.<\/p>\n\n

How to increase customer lifetime value<\/h2>\n\n

There are three levers, one for each part of the formula:<\/p>\n\n

Get them to spend more each time.<\/strong> Recommendations, bundles and cross-selling<\/a> or upselling<\/a>.<\/p>\n\n

Get them to buy more often.<\/strong> Replenishment reminders, new arrivals and offers for customers.<\/p>\n\n

Get them to stay longer.<\/strong> Good service, customer loyalty<\/a> programs and fewer cancellations. Keep an eye on your churn rate<\/a>.<\/p>\n\n

\"Infographic<\/figure>\n\n

The role of email marketing<\/h2>\n\n

Email is one of the cheapest channels for working on all three levers, because it reaches people who already know you:<\/p>\n\n

Welcome.<\/strong> A good welcome sequence<\/a> leads to the second purchase, the hardest one to get.<\/p>\n\n

Post-purchase.<\/strong> Usage tips, related products and review requests.<\/p>\n\n

Replenishment.<\/strong> A reminder when the product usually runs out.<\/p>\n\n

Reactivation.<\/strong> A winback campaign<\/a> for customers who haven’t bought anything in months.<\/p>\n\n

Segmentation by value.<\/strong> With an RFM<\/a> analysis, you can single out your most valuable customers and send them different messages.<\/p>\n\n

Common mistakes<\/h2>\n\n

Calculating it once and forgetting about it.<\/strong> This value changes with prices, products and competition.<\/p>\n\n

Using an average across all customers.<\/strong> Customers from different channels or products have very different values. Separate them.<\/p>\n\n

Forgetting the margin.<\/strong> A high CLV in revenue can hide low profit.<\/p>\n\n

Focusing only on acquisition.<\/strong> Improving retention usually raises it more than winning new customers.<\/p>\n\n

How Mailrelay helps you<\/h2>\n\n

With Mailrelay, you can automate welcome emails, post-purchase emails and reactivation campaigns, and segment your customers based on what they buy. That way, you can work on it without multiplying your workload.<\/p>\n\n

The free account includes up to 80,000 emails a month and 20,000 contacts, with human support by chat, ticket and phone.<\/p>\n\n

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Up to 80,000 emails a month and 20,000 contacts for free, with human support on every plan.<\/p>\n\n\n\n

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Frequently Asked Questions<\/h2>\n\n

These are the most common questions about customer lifetime value.<\/p>\n\n

What is CLV in a nutshell?<\/h3>\n\n

What a customer brings to your business over the whole relationship, not in a single purchase.<\/p>\n\n

What is the CLV formula?<\/h3>\n\n

Average purchase value \u00d7 purchases per year \u00d7 years as a customer \u00d7 profit margin.<\/p>\n\n

What’s the difference between CLV and LTV?<\/h3>\n\n

None. LTV and CLTV are other acronyms for the same metric.<\/p>\n\n

What is a good CLV?<\/h3>\n\n

It depends on the industry. What matters is comparing it with the cost of acquiring a customer: a ratio of 3 to 1 or more is a common benchmark.<\/p>\n\n

How do you increase CLV?<\/h3>\n\n

By getting each customer to buy more, more often and for longer. Email, customer loyalty and good service are the main levers.<\/p>\n\n

Related terms<\/h2>\n\n