How to find out what your customers are really worth

Sales aren't everything: With these four key metrics, you can identify which customers are valuable to your business, how much you can invest in acquisition, and how long customers stay with you.

25 September 2025, 11:06 a.m., by Peter Neitzsch , Business Editor

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Customer metrics provide information about what your company earns from which customers.© Jonathan Kitchen/Getty Images

Content: This article is about

• 1. Customer contribution margin

• 2. Customer Lifetime Value (CLV)

• 3. Customer Acquisition Cost (CAC)

• 4. Customer retention rate

Many companies strive to win as many orders as possible. But sometimes less is more. These metrics help you identify which customers are truly valuable to your business, how much you can invest in acquisition, and how long your customers stay with you on average.

1. Customer contribution margin



Entrepreneurs often only focus on the revenue they generate with a customer. However, it's much more important to ask: Is this order even profitable for me? The customer contribution margin answers this question: It deducts the costs incurred for the product or service from revenue.



If you want to know exactly whether a customer is profitable, you have to deduct a portion of the fixed costs—such as wages or rent. The result is the contribution margin II. According to the formula:

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2. Customer Lifetime Value (CLV)

Contribution margin is always just a snapshot in time. To determine what a customer truly brings to the company, owners should not look at the individual order, but rather at the value of a customer over the entire duration of the relationship.

This customer revenue value is calculated from three key figures: average order value, duration of the customer relationship and purchase frequency.

Customer Lifetime Value = (contribution margin x purchase frequency per year) x customer lifetime

For example, if a bookseller sells five books to his customers per year for €20, he achieves sales of €100 per customer. With a profit margin of 30 percent, he earns €30 per customer per year. If a customer remains loyal for three years, the CLV is €90.

Knowing how much a customer brings to the company overall can help with many decisions: Can I give this customer a discount? Is the time for consulting worth it? And: How much can I spend on marketing?

3. Customer Acquisition Cost (CAC)

Bosses should know what it costs them to acquire new customers. To do this, they need to compare their marketing budget to the number of customers acquired over a given period.

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CAC = acquisition costs / number of new customers

With monthly marketing costs of €2,000 and 200 new customers per month, the acquisition cost per customer is €10. But is the investment worthwhile for my company? That depends entirely on how much the customer brings to the company:

CLV: €90 / CAC: €10 = €9

The advertising costs of 10 euros per new customer are entirely justified in relation to the CLV of 90 euros: for every euro the retailer invests in marketing, he generates 9 euros more in revenue.

4. Customer retention rate

To calculate the CLV, owners need to know how long customers stay with them. The customer retention rate helps with this: If 80 out of 100 customers continue to do business with the business in the following year, it is 80 percent, or 0.8. From this, the average duration of the customer relationship can be derived:

1 / 1 – 0.8 = 5 years

In this example, the customer lifetime is five years.