What does "customer lifetime value" mean in marketing?

Customer lifetime value (CLV) in marketing represents the total worth of a customer to a business over the entire duration of their relationship. This is a vital metric because it helps companies understand how much they can afford to spend on acquiring new customers and retaining existing ones. By assessing CLV, businesses can make more informed decisions about marketing strategies and customer retention efforts.

Calculating CLV involves considering the revenue a customer generates, the costs associated with serving that customer, and the duration of the relationship. This holistic view enables businesses to identify their most valuable customers and tailor their marketing approaches to maximize profitability.

While other options describe different aspects of customer behavior or potential revenue, they do not encompass the broader and more comprehensive view provided by the concept of customer lifetime value. The average amount spent by a customer in a single purchase focuses only on transaction behavior, the potential revenue from a new customer during their first year limits the perspective to a short time frame, and projected sales growth from expanding the customer base pertains to future growth strategies rather than individual customer value over time. Therefore, option A captures the essence of customer lifetime value effectively.