Glossary Entry

Customer Lifetime Value

The expected total (usually discounted) margin a customer generates over their relationship with a business, combining a survival model of how long they stay with a revenue model of what they pay.

Decision Making Data

Also called: CLV, LTV, lifetime value, customer lifetime values

Seed source: Wikipedia, Customer lifetime value

Customer lifetime value prices a customer relationship as an expected discounted cash flow: each future period’s margin, weighted by the probability the customer is still around to pay it, and discounted for the time value of money. For subscription businesses the survival probability is the hard part, typically estimated with survival analysis tools like the Kaplan-Meier estimator.

Its most common use is acquisition economics, comparing what a customer costs to acquire (CAC) against what they are worth, channel by channel. It also drives retention prioritization, since the value of saving a customer is their remaining conditional lifetime value, and finance-facing revenue forecasts with churn already priced in.