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Customer Lifetime Value

Customer lifetime value estimates value across a customer relationship. State whether it measures revenue or profit.

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A simple revenue estimate multiplies average purchase value by purchase frequency per period and relationship duration in the same unit. Multiplying lifetime purchase count by duration again double-counts time.

When comparing with CAC, consider margin, service costs, payback time, and uncertainty. A three-to-one benchmark is not a universal rule for every business.

References

Frequently asked questions

Does revenue CLV above CAC guarantee profitability?

No. Consider delivery and operating costs and when the resulting profit is realized.