Customer Lifetime Value (CLV / LTV)

Customer Lifetime Value (CLV, also written LTV) is the total revenue a single customer generates over the entire relationship with a business. CLV is computed as: Average Order Value × Purchase Frequency × Customer Lifespan × Gross Margin. It is the most important metric in retention strategy because it determines the maximum allowable Customer Acquisition Cost (CAC).

CLV formula

The standard CLV formula: CLV = Avg Ticket × Visits Per Year × Retention Years × Gross Margin. For a medspa with $250 avg ticket, 4 visits/year, 3-year retention, and 70% gross margin: CLV = $250 × 4 × 3 × 0.70 = $2,100. For a coffee shop with $8 avg ticket, 120 visits/year (10/month daily ritual customer), 2-year retention, 80% margin: CLV = $8 × 120 × 2 × 0.80 = $1,536.

Why CLV matters more than acquisition cost alone

CAC (Customer Acquisition Cost) only matters relative to CLV. The healthy SaaS benchmark is LTV:CAC ratio of 3:1 or higher. For local services, payback period matters more than absolute ratio: aim to recover CAC within the first 14-180 days depending on visit frequency tier (daily, weekly, monthly, quarterly, annual).

Industry CLV benchmarks

Typical CLV ranges Wallefy sees across verticals: coffee shops $300-800, medspas $1500-5000, dental practices $2500-8000, HVAC contractors $2000-8000, gyms $800-2000, retail $400-1200, ecommerce $300-900, beauty salons $800-2500. Benchmarks vary by ticket size, visit frequency, and retention years.