Customer Lifetime Value (CLV)

Estimated reading time: 2 minutes

Definition of Customer Lifetime Value

This is a calculation of the total value of a customer over their entire journey with a brand. This can be calculated by looking at the total amount a customer has paid, subtracting the gross margin, and dividing by the churn rate (or cancellation rate) for that customer.


Customer Lifetime Value (CLV) =
(Purchase Frequency [PF] × Average Order Value [AOV] × Gross Margin [GM] × Customer Lifespan [CL]) /
Number of New Customers

Note: This was adapted from the Omniconvert blog


  • Purchase Frequency (PF): This is how often the average customer makes a purchase from you. Choose a measurement for frequency that makes sense for your business. For instance, a car manufacturer and a quick service restaurant are going to have different time frequencies that make sense. The former might be in years and the latter in weeks.
  • Average Order Value (AOV): This is the average amount a customer spends with your brand.
  • Gross Margin (GM): This helps you calculate the amount of profit you make on each order, and gets to a much more accurate number than simply using the Average Order Value (AOV) as your measurement of how much you make from the average customer.
  • Customer Lifespan (CL): Again, make sure to make this in the same unit of measurement of your purchase frequency (weeks, months, years).
  • Number of New Customers: This is the number of new customers you gain within the same unit of frequency chosen for purchase frequency and customer lifespan.


House of the Customer by Greg Kihlström
House of the Customer by Greg Kihlström
  • The Business Value of a Great Employee Experience

  • TDWI: Data, Data Everywhere, But Do You Know What to Do with It?

  • MarTech: North Star goals for category leaders: Agile, customer-centric culture

  • Quality Digest: Balancing Customer Insights With the Bottom Line

  • Martechvibe: Achieving Maximum ROI From Personalised Customer Experiences

  • MarTech: North Star Goals for Category Leaders: Customer Lifetime Value Model