Customer lifetime value is the amount, after expenses, that a business can expect from a specific customer over the course of their relationship.
For example, a fitness studio calculates that its average member stays for 3.5 years, pays $65 per month, and generates a 60% margin — giving a customer lifetime value of roughly $1,638 per member, which helps justify spending up to $200 on marketing to acquire each new client.
Why it matters: It justifies marketing spend; maximizing this value through retention is vastly more profitable than constantly chasing new sales.
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