A metric that estimates the total revenue a business can expect to earn from a single customer account throughout the entire duration of their relationship. CLV is crucial for understanding the long-term value of customers and helps businesses make informed decisions about customer acquisition, retention strategies, and resource allocation. The basic formula for CLV is:

CLV = Average Purchase Value × Purchase Frequency Rate × Customer Lifespan

A more advanced formula may also take into account the profit margin and discount rate to provide a more accurate financial measure.