CLV (customer lifetime value)
Quick answer
Total margin a customer generates across the whole relationship, not just the first order.
Key takeaways
- Set how much you can spend to acquire a customer (CAC)
- Prioritise the portfolio: who deserves monthly visits and who needs a call
- Justify the retention and customer care budget
CLV = average annual gross margin × average relationship length in years. In distribution and manufacturing, where customers reorder, CLV is the metric that justifies retention effort.
How to use it
- Set how much you can spend to acquire a customer (CAC)
- Prioritise the portfolio: who deserves monthly visits and who needs a call
- Justify the retention and customer care budget
Common mistakes
- Calculating on revenue instead of margin
- Ignoring cost to serve (small drops, returns, long payment terms)
Real-world example
A customer generating €9,000 margin a year for an average of four years is worth €36,000. Losing them in year two costs €18,000 of margin, not one order.
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Frequently asked
What data do I need?+
Order history per customer, line margin, and first and last order dates.
How do you grow CLV?+
Planned retention contact, cross-sell into uncovered categories, and lower cost to serve.
Where CRMconnect fits
Related terms
CAC (customer acquisition cost)
The average cost of winning one new customer: sales and marketing spend divided by new customers.
SalesChurn rate
The share of active customers who stop ordering in a given period.
SalesUpsell and cross-sell
Upsell sells a higher tier; cross-sell sells a category the customer does not yet buy from you.