How is customer lifetime value (CLV) best defined?

Customer lifetime value (CLV) is best defined as the total revenue expected from a single customer over the duration of their relationship with a business. This concept takes into account the entirety of the interactions a customer has with a brand, from their first engagement to their last purchase. Understanding CLV allows businesses to estimate the overall value a customer brings, which is critical for making informed decisions about marketing strategies, budgeting, and customer relationship management.

This definition encompasses factors such as repeat purchases, customer retention rates, and the average amount spent over time, providing a comprehensive view of a customer’s financial contribution. By focusing on the long-term relationship and potential future revenue, businesses can assess how much they should invest in acquiring and retaining customers, ultimately leading to more effective marketing tactics and improved profitability.

In contrast, the other options highlight different aspects of revenue generation but do not encompass the holistic view of customer relationships that CLV represents. For instance, average revenue from all customers does not consider individual contributions and their longevity. Revenue from a one-time purchase overlooks the potential for future purchases, and revenue attributed to a single product sold fails to account for the overall relationship a customer may have with multiple products or services over time.