CLTV Calculator — Customer Lifetime Value
With this CLTV calculator, we aim to help you calculate the customer lifetime value of your business. This metric can help you measure the worth of a customer to a company.
We have written this article to help you understand the CLTV definition and how to calculate the metric using the customer lifetime value formula. We will also demonstrate some practical examples to help you understand the concept.
What is customer lifetime value (CLTV)? Customer lifetime value definition
CLTV, short for customer lifetime value, is a metric that measures how much revenue a customer brings to a company throughout their time with the business. Essentially, this metric tells you how much each and every one of your customers is worth to your business. You can check out customer retention rate calculator to understand more on this topic.
This metric allows you to focus your effort on your most valuable customers. It also helps ensure you never overspend on your customer retention effort. With these two functions, applying this metric effectively can help you fully realize your business potential.
How to calculate the customer lifetime value — customer lifetime value formula
Now that you understand what CLTV is, the next step is to talk about how to calculate the customer lifetime value. Let's take Company Alpha with the information below as our customer lifetime value example:
 Total revenue:
$5,000,000
 Number of purchases:
500,000
 Number of customers:
200,000
 Sum of customer lifespans:
300,000 years
We can calculate the CLTV in five steps:

Determine the average purchase value.
The
average purchase value
is the amount of revenue each purchase adds to the business on average. We can calculate it as follows:average purchase value = total revenue / number of purchases
The
average purchase value
for Company Alpha is$5,000,000 / 500,000 = $10
.Check out our present value calculator and revenue calculator to understand more about this topic!

Determine the average purchase frequency.
The
average purchase frequency
tells you how frequently a customer purchases on average. Its formula is:average purchase frequency = number of purchase / number of customers
Hence, the
average purchase frequency
is500,000 / 200,000 = 2.5
. 
Calculate the average customer value.
The
average customer value
is defined as how much a customer is worth to a business in a year. We can calculate this metric using the formula below:average customer value = average purchase value × average purchase frequency
So, the Company Alpha's
average customer value
is$10 × 2.5 = $25
. 
Determine the average customer lifespan.
The next metric to calculate is the
average customer lifespan
. It tells you how long a customer stays with a business on average, and we calculate as follows:average customer lifespan = sum of customer lifespans / number of customers
The
average customer lifespans
for Company Alpha is300,000 years / 200,000 = 1.5 years
.You can check out our time duration calculator to help with this calculation.

Calculate the CLTV.
The final step is to calculate the
CLTV
using the customer lifetime value formula:CLTV = average customer value × average customer lifespan
Thus, the Company Alpha's
CLTV
is$25 × 1.5 = $37.5
.
CLTV calculator in practice
After understanding what CLTV is and the customer lifetime value example, it's time to understand the CLTV's meaning and how to use the metric.
Firstly, although the higher the CLTV is generally better within a business, it is insensible to compare the CLTV between two different businesses.
Using the CLTV formula can help a business both in customer acquisition and customer retention. In customer acquisition, the average CLTV can tell you how much you should spend to acquire a customer. In customer retention, breaking down the factors that impact the CLTV can help you focus your effort at the weakest link to improve the company's profitability. For instance, if the low CLTV is due to a low average purchase frequency rate, you should focus your effort on making your customers buy more often from your business.
FAQ
How do I use the customer lifetime value equation?
You can calculate the CLTV in five steps:

Determine the average purchase value.

Determine the average purchase frequency rate.

Calculate the average customer value.

Determine the average customer lifespan.

Apply the customer lifetime value equation:
CLTV = average customer value × average customer lifespan
What is the difference between customer lifetime value and customer value?
The customer value is often defined as the revenue the customer contributes to the business in a year. However, the customer lifetime value takes into account customer lifespans and tells you the revenue customers contribute to a business over an extended time period.
Can the customer lifetime value model be used for all businesses?
Yes, the customer lifetime value model is extremely important to almost all businesses and industries. No matter if you are dealing with individuals or corporations, it is critical for a business to understand the value of their customers and formulate their strategy around it.
What is the customer lifetime value definition in digital marketing?
The customer lifetime value is the metric that informs you how valuable a customer is. In digital marketing, the CLTV is used to justify how much you should spend on marketing to a customer. If the customer's CLTV is $100, then you should not use any marketing effort to target that customer over $100.
What is CLTV for $25 customer value and 3 year lifespan?
The CLTV will be $75
. You can calculate it by using this formula:
CLTV = customer value × lifespan = $25 × 3 = $75
How do I calculate average customer value?
You can calculate average customer value in three steps:

Determine the average purchase value.

Calculate the average purchase frequency (how many times the average customer makes a purchase in a year).

Apply the average customer value formula:
average customer value = average purchase value × average purchase frequency