Customer lifetime value (CLV) is the total profit you can expect to generate from a single customer throughout their entire relationship with your business. It's calculated by looking at their average purchase value, purchase frequency, and how long they typically remain a customer.This matters because it shows you the real economic engine of your business. When you know a customer is worth $5,000 over three years, you can make informed decisions about how much to invest in acquiring them, serving them, and keeping them happy. Without this insight, you're making financial decisions based on guesswork.

CLV also reveals which customers and market segments are actually driving your profitability. You might discover that your highest-volume customers aren't your most profitable ones, or that certain types of customers stay longer and spend more than others.