Customer Lifetime Value (CLTV)

Customer Lifetime Value or CLTV is an important metric that tells a business how much value a customer contributes to your business during the entire lifetime at your company.

By analyzing CLTV, companies can understand their level of relationship with the customers and how long it will last.

The formula to calculate CLTV is as follows –

CLTV = Average order value x Purchase frequency x Average customer lifetime.

Tracking the results of CLTV is crucial because businesses can ideally predict their valuable customer segments that drive more profits. Because as long as a customer tends to buy from you, the higher will be the CLTV. As a winning sign, your customer retention rates also increase. 

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