Customer Lifetime Value Calculator
Customer lifetime value is the total revenue one customer brings you across the whole relationship. This CLV calculator turns order value, frequency and life span into a single figure- the number that sets how much you can afford to pay to acquire a customer.
How to calculate customer lifetime value
Average order value – what a typical order is worth in revenue, before cost of goods, shipping and discounts are taken out. Take it from your last twelve months, not your best month, or CLV will ruin high from the start.
Purchase per year – how many times the same customers buys in twelve months. One – off buyers score 1; a coffee subscription might score 12. Use the median, because a handful of superfans will drag the mean upward.
Customer lifespan (years) – how long the relationship lasts before they stop buying. If you don’t know, use 1/annual churn rate: 25% churn implies four years.
For example: Take an average order value of $120, four purchases a year, and a three – year lifespan. CLV =$120x4x3=$1,440. That is revenue, not profit. At a 20% gross margin the same customer contributes $288, and $288 – not $1,440 – is what your acquisition cost has to stay under.
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