Customer Lifetime Value (CLV) Calculator
Calculate the potential revenue and profit a customer is expected to generate over their entire relationship with your business.
Enter the average values for purchase value, purchase frequency, customer lifespan, and average profit margin.
Enter Customer Data
Understanding Customer Lifetime Value (CLV)
What is CLV?
Customer Lifetime Value (CLV or CLTV) is a metric that represents the total revenue or profit a business can reasonably expect from a single customer account over the entire period of their relationship.
It's a key metric for understanding the long-term health of a business, guiding decisions on marketing spend, customer acquisition cost (CAC), customer retention efforts, and product development.
CLV Formulas Used
This calculator uses a common simplified model for CLV:
- Average Revenue Per Customer Per Period:
Revenue/Customer/Period = Average Purchase Value * Purchase Frequency - Gross Customer Lifetime Value: (Total Revenue over customer lifespan)
Gross CLV = Average Purchase Value * Purchase Frequency * Customer Lifespan - Profit Customer Lifetime Value: (Total Profit over customer lifespan)
Profit CLV = Gross CLV * (Average Profit Margin / 100)
Where:
- Average Purchase Value: The average amount a customer spends each time they make a purchase.
- Purchase Frequency: The average number of purchases a customer makes within a defined period (e.g., a year).
- Customer Lifespan: The average length of time a customer continues to purchase from your business (in the same defined periods as Frequency).
- Average Profit Margin: The average percentage of revenue that is profit after deducting direct costs.
Keep your "period" consistent (e.g., always use years for Purchase Frequency and Customer Lifespan).
Why Calculate CLV?
Knowing CLV helps businesses:
- Determine how much they can afford to spend to acquire a new customer (CAC).
- Identify their most valuable customer segments.
- Improve customer retention strategies, as keeping existing customers is often less expensive than acquiring new ones.
- Make better business decisions regarding investments in customer service, loyalty programs, etc.
Customer Lifetime Value Examples
Explore how CLV is calculated for different business scenarios. Values are approximate and simplified.
Example 1: E-commerce Retailer
Scenario: An online store wants to estimate the value of a typical customer.
Known Values:
- Average Purchase Value: $60
- Purchase Frequency (per year): 4 times
- Customer Lifespan (years): 3 years
- Average Profit Margin: 25%
Calculation:
Gross CLV = $60 * 4 * 3 = $720
Profit CLV = $720 * (25 / 100) = $720 * 0.25 = $180
Result: Gross CLV = $720, Profit CLV = $180
Conclusion: A typical customer is expected to generate $720 in revenue and $180 in profit over their lifetime with this store.
Example 2: Subscription Box Service
Scenario: A monthly subscription box business.
Known Values:
- Average Purchase Value: $30 (monthly box cost)
- Purchase Frequency (per year): 12 times (monthly)
- Customer Lifespan (years): 2 years (avg subscription length)
- Average Profit Margin: 40%
Calculation:
Gross CLV = $30 * 12 * 2 = $720
Profit CLV = $720 * (40 / 100) = $720 * 0.40 = $288
Result: Gross CLV = $720, Profit CLV = $288
Conclusion: An average subscriber is worth $720 in revenue and $288 in profit over 2 years.
Example 3: SaaS (Software as a Service)
Scenario: A B2B SaaS company with annual contracts.
Known Values:
- Average Purchase Value: $1200 (annual plan cost)
- Purchase Frequency (per year): 1 time (annual renewal)
- Customer Lifespan (years): 4 years (avg customer relationship)
- Average Profit Margin: 70%
Calculation:
Gross CLV = $1200 * 1 * 4 = $4800
Profit CLV = $4800 * (70 / 100) = $4800 * 0.70 = $3360
Result: Gross CLV = $4800, Profit CLV = $3360
Conclusion: A typical SaaS customer is highly valuable, contributing $3360 in profit over their lifespan.
Example 4: Local Coffee Shop
Scenario: Estimating the value of a loyal regular customer.
Known Values:
- Average Purchase Value: $5
- Purchase Frequency (per year): 150 times (about 3 times per week)
- Customer Lifespan (years): 6 years
- Average Profit Margin: 80%
Calculation:
Gross CLV = $5 * 150 * 6 = $4500
Profit CLV = $4500 * (80 / 100) = $4500 * 0.80 = $3600
Result: Gross CLV = $4500, Profit CLV = $3600
Conclusion: Even small individual purchases add up significantly for loyal, long-term customers at a high-margin business like a coffee shop.
Example 5: High-End Jewelry Store
Scenario: A store with infrequent but high-value purchases.
Known Values:
- Average Purchase Value: $2500
- Purchase Frequency (per year): 0.5 times (about once every 2 years)
- Customer Lifespan (years): 10 years
- Average Profit Margin: 50%
Calculation:
Gross CLV = $2500 * 0.5 * 10 = $12,500
Profit CLV = $12,500 * (50 / 100) = $12,500 * 0.50 = $6250
Result: Gross CLV = $12,500, Profit CLV = $6250
Conclusion: While customers buy less often, their high spending makes them very valuable over time.
Example 6: Fitness Gym Membership
Scenario: Calculating the value of a gym member.
Known Values:
- Average Purchase Value: $40 (monthly fee)
- Purchase Frequency (per year): 12 times (monthly payments)
- Customer Lifespan (years): 2.5 years (avg membership duration)
- Average Profit Margin: 60%
Calculation:
Gross CLV = $40 * 12 * 2.5 = $1200
Profit CLV = $1200 * (60 / 100) = $1200 * 0.60 = $720
Result: Gross CLV = $1200, Profit CLV = $720
Conclusion: Membership models can create predictable, valuable customer relationships.
Example 7: Online Course Creator
Scenario: A business selling educational courses.
Known Values:
- Average Purchase Value: $200 (per course)
- Purchase Frequency (per year): 0.8 times (many buy one, some buy more)
- Customer Lifespan (years): 5 years (time they might buy another course)
- Average Profit Margin: 90% (digital product)
Calculation:
Gross CLV = $200 * 0.8 * 5 = $800
Profit CLV = $800 * (90 / 100) = $800 * 0.90 = $720
Result: Gross CLV = $800, Profit CLV = $720
Conclusion: High margin digital products can yield good profit CLV even with lower frequency, especially if lifespan is long.
Example 8: Local Restaurant
Scenario: Estimating a regular diner's value.
Known Values:
- Average Purchase Value: $35 (per meal)
- Purchase Frequency (per year): 24 times (about twice a month)
- Customer Lifespan (years): 4 years
- Average Profit Margin: 20%
Calculation:
Gross CLV = $35 * 24 * 4 = $3360
Profit CLV = $3360 * (20 / 100) = $3360 * 0.20 = $672
Result: Gross CLV = $3360, Profit CLV = $672
Conclusion: Despite a lower profit margin than some businesses, repeat visits from loyal customers build significant value over time.
Example 9: Pet Supply Store
Scenario: The value of a customer who buys pet food and supplies.
Known Values:
- Average Purchase Value: $45
- Purchase Frequency (per year): 10 times
- Customer Lifespan (years): 7 years (avg pet lifespan)
- Average Profit Margin: 30%
Calculation:
Gross CLV = $45 * 10 * 7 = $3150
Profit CLV = $3150 * (30 / 100) = $3150 * 0.30 = $945
Result: Gross CLV = $3150, Profit CLV = $945
Conclusion: Repeat necessity purchases like pet supplies create consistent, long-term value.
Example 10: Online Streaming Service
Scenario: Calculating the value of a streaming subscriber.
Known Values:
- Average Purchase Value: $15 (monthly fee)
- Purchase Frequency (per year): 12 times
- Customer Lifespan (years): 3 years
- Average Profit Margin: 55%
Calculation:
Gross CLV = $15 * 12 * 3 = $540
Profit CLV = $540 * (55 / 100) = $540 * 0.55 = $297
Result: Gross CLV = $540, Profit CLV = $297
Conclusion: Although monthly fees might seem small, they build significant value over the average subscription duration.
Frequently Asked Questions about Customer Lifetime Value
1. What is Customer Lifetime Value (CLV)?
CLV represents the total revenue or profit a single customer is expected to generate throughout their entire relationship with your business.
2. Why is calculating CLV important?
It helps businesses understand the long-term worth of customers, set appropriate customer acquisition costs (CAC), improve retention strategies, and identify most valuable customer segments.
3. What are the key inputs for this CLV calculator?
You need the Average Purchase Value, Purchase Frequency (per period), Customer Lifespan (in periods), and Average Profit Margin (as a percentage).
4. How is Gross CLV calculated?
Gross CLV is calculated as: Average Purchase Value * Purchase Frequency * Customer Lifespan. This represents the total expected revenue.
5. How is Profit CLV calculated?
Profit CLV is calculated by multiplying the Gross CLV by the Average Profit Margin (as a decimal): Gross CLV * (Profit Margin / 100).
6. What does "Purchase Frequency per period" mean?
This is the average number of times a customer buys within your chosen time period, usually a year. If you use 'year' as the period, this is annual purchase frequency.
7. What does "Customer Lifespan in periods" mean?
This is the average number of the chosen time periods (e.g., years) that a customer remains active and continues making purchases from your business.
8. Is this the only way to calculate CLV?
No, this is a simplified model. More complex models exist that might factor in churn rate, discount rates for future revenue (net present value), or segment-specific data. This calculator provides a solid, commonly used estimate.
9. How can I improve my business's CLV?
Strategies include increasing average purchase value (upselling/cross-selling), increasing purchase frequency (loyalty programs, remarketing), extending customer lifespan (better customer service, community building), and improving profit margins (cost reduction, pricing strategy).
10. What units should I use for the inputs?
Ensure you use consistent monetary units (like $, €, £) for Average Purchase Value and a consistent time period (like years) for both Purchase Frequency and Customer Lifespan. The resulting CLV will be in your chosen monetary unit.
