Customer Lifetime Value
Customer Lifetime Value (CLV) is a business metric that estimates the total net profit a company can expect to earn from a customer over the entire duration of their relationship. It helps businesses understand the long-term value of customer segments, guiding decisions on marketing spend, customer retention, and product development. CLV is calculated by analyzing historical data on customer purchases, retention rates, and associated costs.
Developers should learn CLV when building data-driven applications, especially in e-commerce, subscription services, or customer relationship management systems, to implement features like personalized marketing, churn prediction, or loyalty programs. It's crucial for optimizing customer acquisition costs and improving profitability by focusing resources on high-value customers. Understanding CLV enables developers to create analytics dashboards, integrate with CRM tools, and apply machine learning models for predictive insights.