Customer Lifetime Value (CLV)

The total net profit a business expects to earn from a customer over the full duration of their relationship. CLV is the foundational metric of subscription economics. It is calculated by multiplying the average revenue per customer per period by the average customer lifespan, minus the costs of serving that customer. All upsell, cross-sell, and retention activities aim to increase CLV — either by raising the revenue per period or by extending the lifespan. The cancellation flow reveals the business's internal CLV assessment, because the generosity of the retention offer reflects what the company is willing to invest to keep the customer.

Example: A streaming service that offers a discounted annual plan to a departing subscriber is betting that the reduced revenue over the next year still yields a positive CLV for that customer.