What does the "customer lifetime value" (CLV) measure?

Customer lifetime value (CLV) is a critical metric in digital marketing that quantifies the total worth of a customer over the entirety of their relationship with a brand. This metric encapsulates the revenue generated from a customer during their engagement with a business, accounting for various factors such as purchase frequency, average transaction value, and customer retention rate.

By measuring CLV, businesses can make informed decisions about marketing investments, customer engagement strategies, and overall customer relationship management. Understanding the long-term value of customers helps in optimizing resource allocation and cultivating loyalty, ultimately driving profitability. In contrast, the other options do not capture the essence of CLV.

For example, while the total number of customers provides a snapshot of your customer base, it does not reflect their individual worth. The average duration of customer engagement gives insight into how long customers stay but doesn’t quantify their monetary value. Additionally, the cost of acquiring new customers focuses strictly on the expenses related to onboarding new clients rather than the revenue they may generate over time.