Business & Commerce
Intermediate

Customer Lifetime Value (CLV)

The total profit expected from a customer over the whole relationship.

Formula

CLV=ARPU×Gross MarginChurn RateCLV = \dfrac{ARPU \times Gross\ Margin}{Churn\ Rate}

Variables

CLVLifetime value
ARPUAvg revenue per user
Gross MarginMargin fraction
Churn RateMonthly churn (decimal)

Example

ARPU $50, margin 0.8, churn 0.05: CLV = $800

Did You Know?

Small cuts in churn have an outsized effect on CLV because churn sits in the denominator.

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