Loyalty Register glossary
CLV
Customer lifetime value: the total profit a business expects to earn from a customer over the whole relationship.
Customer lifetime value, or CLV, is an estimate of the profit a business expects to earn from a customer over the whole relationship, not from a single purchase. It combines how much a customer is worth in each period with how long they are likely to stay.
Updated · By Loyalty Register Editorial TeamRelated terms
How do you estimate CLV?
The simplest version multiplies the profit a customer brings in each period by the number of periods they are expected to stay. In a hypothetical case, a customer who brings $40 of profit a month and is expected to stay 10 months has a simple CLV of $400. If you expect some of these customers to leave early, you adjust the estimate down: a 20% retention adjustment brings it to $320. More detailed models look at how recently, how often and how much customers buy, and follow groups of customers who joined at the same time.
How do loyalty programs use CLV?
A loyalty program is worth running when it raises the lifetime value of members by more than it costs. That is why programs track what members do compared with other customers. Starbucks, for example, said Rewards members drove nearly 60% of its US company-operated revenue in fiscal 2025, and McDonald’s CEO said loyalty members drive about 30% of its sales and eat at the restaurants about 2.5 times more often. Figures like these show how much spending runs through a program; they do not, on their own, show how much of it the program caused.
What are the common mistakes?
The first is reading member spending as program impact: your best customers tend to join first, so members would look valuable even without the program. Compare members with similar customers who did not join. The second is ignoring churn, which gives a customer who is already leaving the same future as one who is staying. The third is mixing CLV with accounting: CLV is a planning estimate, not revenue the business has earned.
How does CLV connect to other program metrics?
CLV ties together churn, which shortens the relationship, the cost of rewards, which reduces the profit per period, and the data members share, which helps a program make offers that keep them longer.