Customer Lifetime Value (CLV)
It is the total worth expected from a customer across the entire duration of the relationship. This considers the contract value, likelihood of renewal and expansion, and the expected length of the partnership.
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THE HONEST TRUTH
CLV is a projection based on certain assumptions. It is not revenue realized. Building a CLV on optimistic renewal rate flatters the business case. This can provide false signal for spending on customer acquisition and other related activities, which may be detrimental to the vendor’s bottom-line.
CLV is a projection based on certain assumptions. It is not revenue realized. Building a CLV on optimistic renewal rate flatters the business case. This can provide false signal for spending on customer acquisition and other related activities, which may be detrimental to the vendor’s bottom-line.