Customer lifetime value (CLV)

The amount by which revenues from a given customer over time will exceed the company’s costs of attracting, selling, and servicing that customer. The company must subtract from the expected revenues the expected costs of attracting, selling, and servicing that customer. A company not only needs an average customer lifetime value estimate but also should come up with a way to estimate CLV for each individual customer. This is necessary because the company must decide on how much to invest in each customer.