# What is customer lifetime value?

Customer lifetime value is the total margin a customer produces over the whole relationship rather than on one visit. It is the number that justifies giving away a free coffee: the reward is priced against the relationship, not against the transaction.

Source: https://fidella.app/glossary/customer-lifetime-value
Last reviewed: 2026-08-30

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The concept that makes loyalty economics make sense.

## A rough version is enough

Average transaction value, times gross margin, times visits per year, times how
many years a customer typically stays. It will be wrong in the third decimal
place and right about the order of magnitude, which is all you need.

## What it changes

Say a regular is worth a few hundred dollars a year to you. Against that, the
cost of one free coffee stops looking like a giveaway. It starts looking like a
very cheap way to keep them.