What does customer lifetime value (CLV) represent?

Customer Lifetime Value (CLV) represents the total revenue or value a business expects to derive from a customer throughout their entire relationship with that customer. It takes into consideration various factors, such as the customer's purchasing behavior, retention rate, and the average duration of the customer relationship.

Understanding CLV is crucial for businesses as it helps them to strategize on customer acquisition and retention efforts. By knowing the value a customer brings over time, companies can allocate marketing resources more effectively and create tailored strategies to enhance customer loyalty and increase repeat purchases.

In contrast, the other options focus on narrower aspects of customer interaction, such as profits from single transactions or the costs of acquiring new customers, but do not encapsulate the comprehensive view of a customer's overall value to the business across their lifetime.