What is Customer Lifetime Value (CLTV)?

Customer Lifetime Value (CLTV) is a key business metric that estimates the total revenue a business can reasonably expect from a single customer throughout their relationship. By understanding your CLTV, you can make better decisions about how much to invest in acquiring customers, how to improve retention, and how to maximize profits.

This calculator uses three inputs: the average order value (AOV), the frequency of purchases per year, and the estimated customer lifespan in years. The CLTV formula is: CLTV = AOV × Purchase Frequency × Customer Lifespan. For example, if a customer spends $50 per order, purchases 5 times a year, and stays loyal for 3 years, their lifetime value would be $750.

CLTV is essential for marketers, e-commerce platforms, SaaS companies, and service-based businesses. It helps determine customer acquisition cost (CAC) efficiency, pricing strategy, and long-term sustainability. A high CLTV indicates a healthy, loyal customer base and improves the financial forecasting of your business.

Use this tool frequently to compare customer segments, test pricing strategies, and measure retention program success. Optimize your acquisition budget by ensuring that your CAC is well below your CLTV.