acalculator

What is my customer lifetime value?

Enter what a customer spends per order, how often they order, your profit margin and how many years they stay to see their customer lifetime value. Take off what it costs to win a customer, or type a yearly profit per customer instead.

Your numbers

I know the
Customer lifetime value
$320.00

A customer who brings $120.00 of profit a year for 3 years, less $40.00 to acquire, has a lifetime value of $320.00.

Profit per customer per year
$120.00
Lifetime profit before acquisition cost
$360.00
Revenue per customer per year
$300.00
Lifetime revenue per customer
$900.00

Customer lifetime value: $320.00. A customer who brings $120.00 of profit a year for 3 years, less $40.00 to acquire, has a lifetime value of $320.00.

The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use

How to calculate

Computes customer lifetime value (CLV): the yearly profit from one customer × the years they stay − the cost to acquire them, from order value, orders a year and profit margin or from a yearly profit.

Example with the default inputs (I know the Orders and margin, Average order value $50.00, Orders per year 6, Profit margin 40%, Years as a customer 3, Acquisition cost $40.00): A customer who brings $120.00 of profit a year for 3 years, less $40.00 to acquire, has a lifetime value of $320.00.

Method: CLV = profit per customer per year × years as a customer − acquisition cost; from orders, profit per year = average order value × orders per year × profit margin ÷ 100.

  • Profit is after the cost of the goods sold; other costs, such as overheads, are not taken off.
  • Future profit is not discounted: a dollar in a later year counts the same as a dollar today.
  • Arithmetic is exact on the typed decimals; money shows to the cent, halves up.

Machine-readable copies: Markdown, JSON.

Worked examples

Each example is checked against the calculator on every build.

  1. I know the Yearly profit, Profit per customer per year $10,000.00, Years as a customer 12, Acquisition cost $750.00 gives Customer lifetime value $119,250.00, Lifetime profit before acquisition cost $120,000.00.Source: OpenStax, Principles of Marketing, 2.4 Marketing Plan Progress Using Metrics, Table 2.1 (CLV = annual profit per customer × average number of years retained − customer acquisition cost). https://openstax.org/books/principles-marketing/pages/2-4-marketing-plan-progress-using-metrics: (10,000 × 12) − 750 = 119,250
  2. I know the Yearly profit, Profit per customer per year $22,000.00, Years as a customer 8, Acquisition cost $1,200.00 gives Customer lifetime value $174,800.00.Source: OpenStax, Principles of Marketing, 2.4 Marketing Plan Progress Using Metrics, Table 2.1 (CLV = annual profit per customer × average number of years retained − customer acquisition cost). https://openstax.org/books/principles-marketing/pages/2-4-marketing-plan-progress-using-metrics: (22,000 × 8) − 1,200 = 174,800
  3. I know the Yearly profit, Profit per customer per year $34,000.00, Years as a customer 8, Acquisition cost $1,600.00 gives Customer lifetime value $270,400.00.Source: OpenStax, Principles of Marketing, 2.4 Marketing Plan Progress Using Metrics, Table 2.1 (CLV = annual profit per customer × average number of years retained − customer acquisition cost). https://openstax.org/books/principles-marketing/pages/2-4-marketing-plan-progress-using-metrics: (34,000 × 8) − 1,600 = 270,400
  4. I know the Orders and margin, Average order value $50.00, Orders per year 6, Profit margin 40%, Years as a customer 3, Acquisition cost $40.00 gives Revenue per customer per year $300.00, Profit per customer per year $120.00, Lifetime revenue per customer $900.00, Lifetime profit before acquisition cost $360.00, Customer lifetime value $320.00.Source: OpenStax, Principles of Marketing, 2.4 Marketing Plan Progress Using Metrics, Table 2.1 (CLV = annual profit per customer × average number of years retained − customer acquisition cost). https://openstax.org/books/principles-marketing/pages/2-4-marketing-plan-progress-using-metrics
  5. I know the Orders and margin, Average order value $20.00, Orders per year 2, Profit margin 25%, Years as a customer 1, Acquisition cost $30.00 gives Profit per customer per year $10.00, Customer lifetime value -$20.00.Source: OpenStax, Principles of Marketing, 2.4 Marketing Plan Progress Using Metrics, Table 2.1 (CLV = annual profit per customer × average number of years retained − customer acquisition cost). https://openstax.org/books/principles-marketing/pages/2-4-marketing-plan-progress-using-metrics

How it works

With the profit from one customer per year P, the years they stay as a customer Y and the acquisition cost C (what it costs to win one customer):

  • Customer lifetime value CLV = P × Y − C
  • Lifetime profit before acquisition cost = P × Y

This is the formula in OpenStax Principles of Marketing. Choose how to enter P:

  • Orders and margin: with the average order value V, the orders per year N and the profit margin m in percent, the revenue per customer per year is R = V × N, and P = R × m ÷ 100. The page also shows the lifetime revenue per customer, R × Y.
  • Yearly profit: type P yourself.

Rules:

  • The order value is $0 to $1 billion, the orders per year 0 to 1 million, the margin 0% to 100%, and the years 0 to 100. The yearly profit and the acquisition cost are $0 to $1 trillion.
  • The lifetime value is negative when the acquisition cost is more than the lifetime profit.
  • A result too large or too small to show as a number gives no answer.
  • The arithmetic is exact on the decimals you type. Money shows to the cent, with halves rounded up (away from 0).

Assumptions

  • The margin is the gross margin: the share of each sale left after the cost of the goods sold. Overheads such as rent are not taken off.
  • Future profit is not discounted, so a dollar earned in year 10 counts the same as a dollar today. The longer customers stay, the more this overstates the value in today's money.
  • The yearly profit is the same in every year the customer stays.

Worked examples by hand

Millennial parents (OpenStax Table 2.1). P = $10,000 a year, Y = 12 years, C = $750. CLV = 10,000 × 12 − 750 = $119,250.

Working moms (OpenStax Table 2.1). CLV = 22,000 × 8 − 1,200 = $174,800.

Gen Z kept for 8 years. OpenStax asks what happens if Gen Z customers stay 8 years instead of 2: CLV = 34,000 × 8 − 1,600 = $270,400.

A shop. Orders average $50, a customer orders 6 times a year, the margin is 40%, customers stay 3 years and cost $40 to win. R = 50 × 6 = $300 a year. P = 300 × 40 ÷ 100 = $120 a year. Lifetime revenue = 300 × 3 = $900, lifetime profit = 120 × 3 = $360, and CLV = 360 − 40 = $320.

A customer who costs more than they bring. $20 orders, 2 a year, a 25% margin, 1 year, and $30 to win: P = 20 × 2 × 25 ÷ 100 = $10, so CLV = 10 × 1 − 30 = −$20.

Other questions people ask

What is customer lifetime value?

Customer lifetime value (CLV) is an estimate of how much one customer is worth to a business over all the years they keep buying. It looks ahead, so it is an estimate, not a promise.

How do I calculate customer lifetime value?

Multiply the yearly profit from one customer by the number of years they stay, then subtract what it cost to win them. A customer who brings $10,000 of profit a year for 12 years and cost $750 to win has a CLV of 10,000 × 12 − 750 = $119,250.

How do I find the yearly profit per customer?

Multiply the average order value by the orders a customer places in a year to get their yearly revenue, then multiply by your profit margin. $50 orders, 6 times a year, at a 40% margin is 50 × 6 × 0.40 = $120 of profit a year.

Should I use revenue or profit?

Profit gives the truer value, because revenue still has to pay for the goods you sell. The page shows both: the lifetime revenue per customer and the lifetime value from profit. To see a value based on revenue alone, set the margin to 100%.

How do I estimate how long a customer stays?

Use the average number of years your customers keep buying. If the same share of customers leaves every year, they stay 1 ÷ that share years on average: with 25% leaving each year, that is 1 ÷ 0.25 = 4 years.

Why take off the acquisition cost?

Winning a customer costs money: ads, sales time and offers. Taking that cost off shows what the customer is worth after you paid to win them. A customer whose lifetime profit is less than the acquisition cost has a negative CLV.

How can I raise customer lifetime value?

Keep customers longer, get them to order more often or spend more per order, raise your margin, or win them for less. Each of these moves the value directly: doubling the years a customer stays doubles the lifetime profit.