What is Customer Lifetime Value?
Definition: Customer lifetime value or CLTV is the present value of the future cash flows or the value of business attributed to the customer during his or her entire relationship with the company.
In Plain English: Customer lifetime value is the total amount of revenue that you expect a customer to generate.
Example: Your customers pay a monthly subscription of $10/mo and they have an average churn rate of 5%. The average lifetime of your customers is 1/5% churn = 20 months. The lifetime value of your customers is 20 mo x $10/mo=$200
Why Should You Care?
Customer lifetime value allows you to see the total amount of revenue that you expect a customer to generate. This gives important insights on how you should price your products and on how much money you should spend in acquiring new customers.