Customer Lifetime Value (CLV) Calculator
Customer lifetime value (CLV or LTV) estimates the total value a customer brings over their relationship with you. Enter your average order value, how often customers buy and how long they stay, with an optional gross margin to base LTV on profit.
How to calculate customer lifetime value
- Enter your average order value.
- Enter how many times a customer buys per year and how many years they stay.
- Optionally add your gross margin to see lifetime value as profit rather than revenue.
Examples
AOV $50, 4 orders a year, 3 years
AOV = 50, frequency = 4, lifespan = 3
annual value = $200, LTV = $600
Same customer at a 60% gross margin
AOV = 50, frequency = 4, lifespan = 3, margin = 60%
LTV = $360
Frequently asked questions
What is customer lifetime value (CLV)?
Customer lifetime value is the total value a customer is expected to bring over the whole time they buy from you. A simple model is average order value times purchase frequency per year times the number of years they stay a customer.
How is LTV calculated in this tool?
Annual value is your average order value multiplied by how many times a customer buys per year. Lifetime value is that annual value multiplied by the customer lifespan in years. If you add a gross margin, LTV is multiplied by the margin so it reflects profit instead of revenue.
Should I use a gross margin?
If you want LTV as revenue, leave the margin out. If you want LTV as gross profit, which is more useful for comparing against acquisition cost, enter your gross margin so a 60% margin turns a $600 revenue LTV into a $360 profit LTV.
How does LTV relate to acquisition cost?
LTV is most useful next to customer acquisition cost. A common healthy benchmark is an LTV to CAC ratio of at least 3:1, meaning each customer is worth at least three times what they cost to acquire.
How can I increase customer lifetime value?
Raise average order value with bundles and upsells, increase purchase frequency with email and loyalty programs, and lengthen the customer lifespan by improving retention and reducing churn.
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