Explain the term customer lifetime value?

Customers are those individuals or businesses who purchase goods or services from another businesses.

Customer lifetime value (CLV) is the value represents the total amount of money a customer is expected to spend in business or on products during their lifetime. It is important for marketers because it helps to make decisions about how much money to invest in acquiring new customers and retaining existing ones.

CLV can be calculated as:

$Average Value of Purchase \times number of times the customer will buy each year \times Average length of customer relationship(in years)$

Calculating the CLV for different customers helps in taking decisions in business. CLV helps to determine following things: 

• How much marketers can spend to acquire a similar customer and still have a profitable relationship
• What kinds of products customers with the highest CLV want
• Which products have the highest profitability
• Who the most profitable types of clients are