What is customer lifetime value (CLV)?

A regular who buys a £3.50 coffee five days a week for two years spends about £1,800. Knowing that changes how you think about a free coffee on a bad day. Customer lifetime value — CLV — is that number for a typical customer.

The formula

A simple version that works for most small businesses:

CLV = average order value × orders per year × years as a customer

To value it in profit rather than sales, multiply by your gross margin:

CLV (profit) = CLV × gross profit margin

A worked example

Your average order is £8.40, a typical regular orders 30 times a year, and they stay about 2 years.

£8.40 × 30 × 2 = £504 in sales. At a 70% gross margin, that is £352.80 of gross profit.

Why it matters

• It tells you what a customer is worth keeping. Spending £5 to win back a regular worth £350 is easy maths.
• It shows what to improve. CLV rises with average order value, with visits per year and with how long people stay — three different levers.
• It puts complaints in perspective. Fixing a problem for a regular is rarely too expensive.

How to raise it

1. Bring people back sooner — a loyalty programme, a reason to return.
2. Raise each order a little — suggest the side, the pastry, the larger size.
3. Keep them longer — consistent quality is the cheapest retention there is.

Common mistakes

1. Using revenue as profit. Multiply by margin before deciding what a customer is worth spending on.
2. Averaging everyone together. Regulars and one-off visitors have very different values — look at them separately.
3. Measuring only who you can identify. CLV needs a customer record; anonymous sales cannot be followed.

Tracking it in DUMA

Each customer record in DUMA holds their order history and loyalty, so you can see what a regular spends with you. The Customer retention report shows new and returning customers and the repeat rate, and Sales summary gives you average order.