The total revenue a typical customer generates over the entire time they remain a customer.
Definition
Customer lifetime value (CLV or LTV) is the total revenue you can expect from a typical customer from the first transaction through their last. CLV is calculated as average transaction value × purchase frequency × retention period. Some calculations subtract cost of goods to produce a profit-based CLV.
Why it matters
CLV is the foundation of every direct mail ROI calculation. Without it, you can only measure the immediate response — and most direct mail campaigns don't pay back on the first transaction. A reactivated dental patient is worth $1,200 in year one and $5,000+ over five years, which is what justifies spending $5–10 to bring them back.
Example
A med spa's average client visits 3 times per year at $250 per visit and stays for 4 years on average — a CLV of $3,000. Spending $20 to reactivate a lapsed client is a clear win even if they don't book until their second postcard.
Related terms
- Return on Investment — The ratio of revenue generated to total campaign cost — typically expressed as X:1 or a...
- Break-Even Response Rate — The minimum response rate at which campaign revenue covers campaign cost — below this, ...
- House List — A mailing list of your existing or past customers, built and owned by your business.
- Reactivation Campaign — A targeted marketing sequence aimed at bringing back lapsed or inactive customers.
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