A measure of the average customer's revenue generated over their entire relationship with a company.
It's a projection of the possible net profit that can be gained from a future relationship with a consumer.
To calculate the customer lifetime value of a consumer, the simplest formula for measuring customer lifetime value is the average order total multiplied by the average number of purchases in a year multiplied by average retention time in years.
In other words, multiply the average amount of monthly transactions, by the average order value, and multiply that value by the average customer lifespan in months, and then finally multiply that value by your company’s average gross margin.