Customer Lifetime Value (LTV) Calculator
Calculate the total expected revenue from a customer over their relationship with your business using three key metrics.
Input Values
Understanding Lifetime Value
What is LTV?
Customer Lifetime Value (LTV) predicts the total revenue a business can expect from a single customer account throughout their relationship. It helps businesses make informed decisions about acquisition costs, marketing budgets, and customer retention strategies.
LTV Formula Components
- Average Purchase Value (APV): Total revenue divided by number of purchases
- Purchase Frequency (PF): Transactions per year
- Customer Lifespan (CL): Average retention period in years
LTV Calculation Examples
Example 1: Coffee Shop Customer
Scenario: Calculate LTV for a regular coffee shop customer.
APV: $5 per visit
PF: 3 visits/week × 52 weeks = 156/year
CL: 5 years
Calculation: $5 × 156 × 5 = $3,900
Example 2: SaaS Subscription
Scenario: Monthly subscription service.
APV: $50/month ($600/year)
PF: 1 payment/year
CL: 3.5 years
Calculation: $600 × 1 × 3.5 = $2,100
Example 3: E-commerce Customer
Scenario: Online fashion retailer.
APV: $85 per order
PF: 2.5 orders/year
CL: 4 years
Calculation: $85 × 2.5 × 4 = $850
Example 4: Luxury Car Dealer
Scenario: High-end vehicle sales.
APV: $85,000 per car
PF: 0.3 purchases/year
CL: 10 years
Calculation: $85,000 × 0.3 × 10 = $255,000
Example 5: Gym Membership
Scenario: Fitness center member.
APV: $800/year
PF: 1 payment/year
CL: 2.2 years
Calculation: $800 × 1 × 2.2 = $1,760
Frequently Asked Questions
1. What's considered a good LTV?
LTV varies by industry. Generally, LTV should be at least 3x Customer Acquisition Cost (CAC).
2. How often should I recalculate LTV?
Review quarterly or when significant changes occur in pricing, retention, or purchasing patterns.
3. Does LTV include costs?
This basic formula calculates gross LTV. For net LTV, subtract costs (COGS, service, etc.).
4. How to improve LTV?
Increase APV (upselling), PF (repeat purchases), or CL (retention strategies).
5. What's considered a "lifespan"?
The average duration from first to last purchase. Calculate as 1/churn rate.
6. Limitations of basic LTV?
Doesn't account for discount rates, variable spending, or changing market conditions.
7. Difference between LTV and CLV?
They're often used interchangeably, though some models differentiate between lifetime value (LTV) and customer lifetime value (CLV).
8. How to validate inputs?
Use historical data: APV = Total Revenue / Transactions, PF = Transactions / Customers, CL = 1 / Churn Rate.
9. Seasonal businesses?
Use annualized averages. Ensure PF reflects actual purchase cycles.
10. Cohort analysis vs LTV?
LTV is often calculated for cohorts (customer groups) to account for varying behaviors over time.
