What is Customer Lifetime Value (CLV)?

Customer Lifetime Value (CLV, also LTV) is the total revenue (or profit) a business expects to earn from a single customer across their entire relationship. It combines average order value, purchase frequency, and customer retention to project the long-term value of acquiring and retaining a customer. CLV is the counterpart to Customer Acquisition Cost (CAC)—together, they determine whether your growth is profitable.

Why It Matters

CLV determines how much you can afford to spend acquiring and retaining customers while maintaining profitability. If your CLV is $300 and your CAC is $50, you have a healthy 6:1 ratio. If your CLV drops to $75, that same $50 CAC is barely break-even. CLV also reveals which customer segments are most valuable, guiding marketing allocation, product development, and service investment decisions.

How It Works

• Simple Calculation: CLV = Average Order Value × Purchase Frequency × Average Customer Lifespan. If customers spend $75 per order, buy 4 times per year, and remain active for 3 years: CLV = $75 × 4 × 3 = $900.
• Segmented CLV: Calculate CLV by acquisition channel, first product purchased, and customer demographics. This reveals which segments are most valuable and where to focus marketing spend.
• Predictive CLV: Advanced models use machine learning to predict individual customer CLV based on early behavior signals (order frequency, product categories, return rates).
• Operational Impact: Fulfillment quality directly affects CLV. Customers who receive late, incorrect, or damaged orders have significantly lower CLV than those with consistently positive experiences.

How Nventory Helps

Nventory supports CLV growth by ensuring every order is fulfilled accurately, on time, and with full visibility—the operational foundations that drive repeat purchasing and customer retention. The system’s cross-channel order data provides the purchase history needed to calculate and track CLV across customer segments and channels.