You want to be successful in you business? Long term? Then you must start really understanding your customers - their needs and wants. Customer Lifetime Value (CLV) is one of the most important metrics for businesses looking to grow and thrive. But what is CLV, why does it matter, and how can it help your business make smarter decisions?
Customer Lifetime Value (CLV) is exactly what it sounds like: the complete value a certain customer brings to your business, throughout their entire relationship with you.
Instead of focusing on what a customer spends in one transaction, CLV helps you understand the bigger picture—how much they’re likely to spend during their entire lifetime as a customer.
For example, imagine you run a local coffee shop. One person might stop by every day for a cup of coffee costing €2. That customer is worth €2 to you on that day.
But over the course of a year, if they come five times a week for 52 weeks, they actually spend much more... And if they remain a loyal customer for, say, three years?
CLV is what shifts your mindset from thinking about one-time sales to thinking about long-term relationships with customers. And why does that matter?
Because businesses that focus on customer retention and loyalty often outperform those that are constantly chasing new customers.
CLV is a crucial tool to help you measure and grow those relationships.
Not all customers are created equal. Some might only buy from you once and never return, while others become loyal fans who buy regularly. CLV helps you identify which customers are worth your time and investment.
We’ll give another example, an online clothing store. You have two types of customers:
1. Customer A buys a €100 dress once and never returns.
2. Customer B spends €50 on a dress every three months for several years.
Even though Customer A’s first purchase is higher, Customer B is much more valuable in the long run. Over two years, Customer B will have spent €400 at your store, compared to Customer A’s one-time €100.
By understanding CLV, you can focus your marketing strategy on finding more Customer Bs—people who will keep coming back.
This is much more cost-effective than constantly acquiring new Customer As who may only buy once. Businesses often spend 5 to 25 times more money developing a new customer than retaining an existing one, so knowing your CLV can help you allocate resources more wisely.
A great example of maximizing CLV is Zalando and its Plus program. Zalando, one of leading online fashion retailer, encourages customer loyalty by offering benefits such as free express shipping, early access to sales, and exclusive customer service. Members of Zalando Plus tend to shop more frequently and spend more compared to non-members.
They transform casual shoppers into repeat, long-term customers by providing added value upfront, and this strategy helps boost their CLV by creating a sense of loyalty and ensuring customers return for future purchases.
The formula for calculating CLV looks simple, but it’s packed with insights:
CLV = (Average Purchase Value) x (Purchase Frequency) x (Customer Lifespan)
Let’s break it down using a coffee shop example:
Using these numbers, let’s calculate the CLV for your typical coffee shop customer:
€2 (average purchase) x 5 (times per week) x 52 (weeks per year) x 3 (years)
= CLV €1560
€1560 from one loyal customer? And that’s just coffee. Imagine what happens when you add pastries, sandwiches, or even merchandise to the mix.
This simple formula provides valuable information into your business’s long-term revenue potential. By knowing your CLV, you can make better decisions on marketing spend, customer acquisition strategies, and customer service communication.
By knowing what CLV is and its purpose, you can completely transform how you run your business. It helps you answer key questions, like:
Let’s say you’re debating whether to spend €100 on Facebook ads to attract new customers or to invest €100 in offering discounts or loyalty rewards to existing ones. If you know that your CLV for a returning customer is €1560, it might make more sense to spend that money on nurturing your current customer base rather than acquiring one-time buyers.
Another example comes from the world of streaming services. Netflix, for instance, invests heavily in improving its user experience through personalised recommendations, ensuring that customers remain engaged with the platform over a long period. By focusing on customer retention, Netflix increases the CLV of its subscribers, ensuring they stay subscribed year after year.
Increasing your CLV means getting more value from each customer, directly impacting your bottom line. Here are some actionable strategies:
Happy customers are more likely to return. Whether it’s through excellent customer service, fast shipping, or a seamless website experience, make sure your customers leave satisfied. A small positive interaction can build loyalty over time.
People love feeling special. They also love personalised offers or product when they receive recommendation based on their purchase history can. Retailers like Amazon use algorithms to suggest products you might like, which encourages additional purchases.
Loyalty programs reward repeat customers, increasing their likelihood of coming back. Whether it’s a points system like or a subscription model like, rewarding loyal customers boosts CLV.
Create meaningful touchpoints through newsletters, social media, or even educational blog posts that keep your brand top-of-mind. When your customers feel engaged and connected to your business or brand, it's more likely they'll remain loyal.
Real-World example? Apple.
Apple has mastered increasing CLV through its product ecosystem. Once a customer buys an iPhone, they will probably purchase other Apple products because of how seamlessly everything works together. By offering an integrated experience, Apple increases the long-term value of each customer.
Customer Lifetime Value (CLV) isn't just a number—it's the best way to build stronger, more profitable customer relationships.
When you shift your focus from quick, one-time sales to keeping customers happy and loyal for the long haul, you're setting your business up for smarter decisions and sustainable growth.
By investing in things like loyalty programs, personalised experiences, or top-notch customer service, you're not just boosting CLV—you’re creating a win-win situation. Your customers feel valued, and your business reaps the rewards with repeat sales and long-term success.