Average Customer Lifetime Value (ACLV)

Average customer lifetime value (ACLV) is the total recurring charges fees for subscription billing. It is an important measurement for subscription or recurring revenue based businesses. In a subscription context, ACLV is the product of the average customer duration and the amount charged on a recurring basis: (average customer duration) x (amount charged) = ACLV. Increasing the average customer lifetime by just a few months can lead to significantly higher ongoing revenue streams.

Many subscription businesses focus customer acquisition efforts around optimizing the conversion rate, especially if they offer a free trial or provide a freemium offering. They then rate their various marketing campaigns and activities around that metric. For example, if webinars drive the highest conversion rates, they will pour more money into developing additional webinars.

However, a better approach is to focus business activities around maximizing ACLV. To identify long-term profitable customers and thereby maximize ACLV, acquisition, conversion and retention metrics should be viewed together versus in isolation.