Customer Lifetime Value Calculator

What is Customer Lifetime Value?

Customer Lifetime Value (CLV) is the total worth to a business of a customer over the whole period of their relationship. It's an important metric that indicates the long-term value of customer acquisition and retention efforts.

CLV Calculator

Customer Lifetime Value:

CLV Calculation

  • Basic Formula: Average Purchase Value × Purchase Frequency × Customer Lifespan
  • Example: $100 average purchase, 4 purchases per year, 3-year lifespan
    • $100 × 4 × 3 = $1,200 CLV

Key Points

  • CLV helps in understanding the long-term value of customer relationships
  • It's crucial for determining how much to invest in acquiring and retaining customers
  • CLV can vary significantly across different customer segments
  • It's influenced by factors like customer satisfaction, loyalty programs, and product quality
  • More complex CLV models may factor in profit margins and discount rates

Why CLV Matters

  • Guides customer acquisition and retention strategies
  • Helps in identifying and nurturing high-value customer segments
  • Informs decisions on marketing budget allocation
  • Provides context for interpreting Customer Acquisition Cost (CAC)
  • Supports long-term business planning and forecasting

Using CLV

  • Compare CLV to CAC to ensure profitable customer relationships
  • Segment customers based on their lifetime value
  • Tailor marketing and retention efforts to maximize CLV
  • Use CLV insights to improve product development and customer service
  • Monitor CLV trends over time to assess overall business health