Customer Lifetime Value (CLV)
The predicted total revenue a customer will generate throughout their entire relationship with a business.
In-Depth Explanation
Customer Lifetime Value (CLV or CLTV) estimates the total value a customer will bring to a business over the entire relationship. AI enables more accurate CLV prediction by analysing behaviour patterns and predicting future actions.
CLV calculation approaches:
- Historical: Sum of past purchases
- Predictive: ML models forecasting future value
- Traditional formula: (Avg Purchase × Purchase Frequency × Customer Lifespan)
Factors affecting CLV:
- Average order value
- Purchase frequency
- Customer retention rate
- Acquisition cost
- Gross margin
- Referral value
AI-enhanced CLV:
- Individual-level predictions
- Real-time CLV updates
- Propensity to purchase models
- Churn probability integration
- What-if scenario modelling
Business Context
CLV guides customer acquisition spending, retention investment, and strategic resource allocation across customer segments.
How Clever Ops Uses This
We help Australian businesses implement AI-powered CLV prediction to optimise acquisition costs and retention investments.
Example Use Case
"Using predictive CLV to identify that acquiring customers through referrals has 3x higher lifetime value, shifting marketing budget accordingly."