Customer Lifetime Value Formula
Customer Lifetime Value (LTV) is a crucial metric that estimates the total revenue a business can reasonably expect from a single customer account over their relationship with the company. Understanding LTV empowers SaaS businesses to make data-driven decisions on marketing spend, customer retention, and product development.
Formula
Copy the exact expression or work through it step by step below.
LTV = Average Purchase Value x Purchase Frequency x Customer Lifespan Variables
LTV
LTV
The ltv value plugged into the customer lifetime value calculation.
APV
Average Purchase Value
The average purchase value value plugged into the customer lifetime value calculation.
PF
Purchase Frequency
The purchase frequency value plugged into the customer lifetime value calculation.
CL
Customer Lifespan
The customer lifespan value plugged into the customer lifetime value calculation.
Step By Step
- 1
Set the baseline case with the real calculator inputs.
Avg Purchase Value = $50.00, Purchase Frequency Per Year = 4, Customer Lifespan Years = 3, Acquisition Cost = $100
- 2
Translate rates, periods, and cash values onto the same footing before combining them.
Keep the customer lifetime value assumptions consistent instead of mixing monthly and annual views.
- 3
Apply the formula and read the first calculator outputs, not just the headline assumption.
The calculator lands with clv at 600 and annual value at $200.
- 4
Run one changed scenario so the formula is stress-tested before it is trusted.
The customer lifetime value calculator page is the fastest way to compare that second case.
Worked Example
Customer Lifetime Value sample case
Avg Purchase Value
$50.00
Purchase Frequency Per Year
4
Customer Lifespan Years
3
Acquisition Cost
$100
LTV = Average Purchase Value x Purchase Frequency x Customer Lifespan using avg purchase value $50.00, purchase frequency per year 4, customer lifespan years 3, acquisition cost $100.
The calculator lands with clv at 600 and annual value at $200.
Common Variations
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Sources & References
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