# CLTV Calculator — Customer Lifetime Value

Created by Wei Bin Loo
Reviewed by Dominik Czernia, PhD and Steven Wooding
Last updated: Jan 18, 2024

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:

The CLTV will be $75. You can calculate it by using this formula: CLTV = customer value × lifespan =$25 × 3 = $75 ### How do I calculate average customer value? You can calculate average customer value in three steps: 1. Determine the average purchase value. 2. Calculate the average purchase frequency (how many times the average customer makes a purchase in a year). 3. Apply the average customer value formula: average customer value = average purchase value × average purchase frequency Wei Bin Loo Average customer value Average purchase value$
Average purchase frequency
Average customer value
$Customer lifetime value (CLTV) Average customer lifespan yrs CLTV$
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