Customer Lifetime Value is defined as the dollar value of a customer relationship, based on the present value of the projected future cash flows from the customer relationship.
Customer lifetime value is an important concept in that it encourages firms to shift their focus from quarterly profits to the long-term health of their customer relationships. Customer lifetime value is an important number because it represents an upper limit on spending to acquire new customers.
This measure is essential as it provides a deeper understanding of how much a particular customer may be worth over time and not just during a single purchase.
It also can determine whether marketing should allocate more resources to upholding this relationship or not.
In its most advanced form, you can use predictive CLV to determine the value you expect an individual to have over their future lifetime with your company.