Customer lifetime value

Customer lifetime value is the expected net value of all future transactions with a customer, discounted to today. The concept forces a healthy question: what may a customer cost to acquire and keep? As a calculation, however, CLV is softer than it looks. The outcome leans entirely on assumptions about retention, margin and time horizon, and small changes double or halve the value. In contractual markets with predictable churn it is useful equipment; in repertoire markets, where customers switch brands effortlessly, an individual lifetime value is largely fiction. CLV is a thinking frame for investment decisions, not a precision instrument.

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