A customer pays 80 riyals for a monthly subscription. If we look at that transaction alone, their value seems to be 80 riyals. But what if they keep their subscription for three years? What if they buy additional services during that time?

Suddenly, the first month’s bill is no longer the best way to understand this customer’s value.

This perspective is why companies distinguish between the value of a transaction today and the value of a customer relationship over time.

From a single bill to a complete relationship

In her Marketing Management course at Al Yamamah University, Dr. @Yosra Missaoui discussed the concept of Customer Lifetime Value (CLV), which looks at the present value of the net profits expected from a customer’s purchases over the course of their relationship with a company.

This idea changes how we think about customers. Instead of asking, “How much did the company earn from this purchase?” the question becomes, “How much value could this relationship generate over its lifetime?”

Take a customer who joins a gym, for example. The company may not earn much from them in the first month, especially if it incurred a cost to persuade them to sign up. But if they stay for years, renew their membership, and buy additional services, the economics of the relationship look very different from those of the initial subscription.

This brings us to one of the most important ideas behind CLV: the customer who spends the most today is not necessarily the most valuable in the long run.

A customer who spends a large amount once and never returns may be less valuable than one who spends less but continues doing business with the company for a long time.

How much is it worth spending to acquire them?

This perspective doesn’t just help companies understand the value of their customers; it also shapes decisions about how much to spend on them.

If a company expects a customer relationship to generate good value in the future, it may make sense to incur a cost to acquire that customer and later invest in retaining them. That’s why CLV is used to help determine how much a company can spend to acquire a customer and how much it’s worth investing to maintain the relationship.

But CLV is not a promise that a customer will stay forever. It is an estimate based on assumptions about how long the relationship will last, purchasing behavior, and future profitability. When a customer’s behavior changes, their expected value changes too.

That’s what makes thinking in terms of lifetime value different from simply adding up past sales: it encourages a company to look ahead, not just at what the customer has already spent.

This perspective is especially important for companies that sell subscriptions or recurring services, or rely on customers returning. The first sale is not the end of the economic relationship; it may only be the beginning.

So, when a new customer joins the company, “the most useful question may not be: How much did they spend today?

But: How much could this relationship be worth if it continues?”