Customer lifetime value describes the monetary value expected from an individual customer over the course of their entire business relationship.
The customer lifetime value (CLV) comprises all expenditures made by a customer from the beginning of the customer relationship and thus includes all purchases, services, and add-ons. The CLV thus helps to estimate how valuable a customer is, or how valuable he will become in the course of the business relationship.
Calculation of Customer Lifetime Value
CLV = Average purchase value x Number of purchases per year x Average customer relationship in years