Formula
CLV = (Average Purchase Value × Purchase Frequency) × Customer Lifespan
Calculation Example
If a customer spends $50 per purchase, makes 10 purchases per year, and remains a customer for 5 years, CLV = (50 × 10) × 5 = $2,500
Data Source
CRM software, sales data, financial records
Tracking Frequency
Monthly, Quarterly, Annually
Optimal Value
Should be significantly higher than CAC to ensure profitability.
Minimum Acceptable Value
A CLV lower than CAC means a business is losing money on customer acquisition.
Benchmark
E-commerce ~3-5x CAC, SaaS ~4-10x CAC
Recommended Chart Type
Bar chart (to compare customer segments), Line chart (to track trends)
How It Appears in Reports
Presented as a total dollar amount, compared against CAC for profitability analysis.
Why Is This KPI Important?
Shows long-term profitability of customer relationships, guiding marketing and retention strategies.
Typical Problems and Limitations
Can be misleading if customer retention is not stable, assumes past behavior predicts future behavior.
Actions for Poor Results
Increase customer retention efforts, improve upselling and cross-selling strategies.
Related KPIs
Customer Acquisition Cost (CAC), Retention Rate, Churn Rate
Real-Life Examples
A SaaS company improved CLV by introducing tiered pricing, leading to a 20% increase in customer retention.
Most Common Mistakes
Calculating CLV using incomplete customer data, ignoring retention impact.
