What is a good Customer Lifetime Value?

A good Customer Lifetime Value is anything that ensures that your business will break even or stay profitable.

CLV depends on a number of variables, including AOV (average order value), frequency of purchasing, churn rate (how many customers will lapse or cancel their subscription), and your cost per acquisition.

What is the Customer Lifetime Value Formula?

CUSTOMER LIFETIME VALUE FORMULA = (AOV x FREQUENCY OF PURCHASE x LOYALTY PERIOD) - COST TO ACQUIRE

AOV represents the average order value, multiplied by the frequency of purchase, multiplied by the loyalty period measured in months or years.

Customer Lifetime Value Example:

Examples of companies that use CLV as a key metric: Personal Trainers, Gyms, SaaS companies (ie. Email Marketing Software), and Subscription Services.

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For example, a customer signs up for a gym membership, on a $100/month subscription. The customer will stay loyal for 12 months. the gym spent $200 on marketing to acquire the customer. CLV is ($100 x 12 months) - $200, or $1,000.