Customer Lifetime Value Calculator
This CLV calculator gives loyalty, CRM, and retention teams a simple way to estimate how much a customer is worth over time before acquisition and servicing costs.
How this calculator works
Calculate customer lifetime value from average order value, purchase frequency, gross margin, and expected customer lifespan.
Annual revenue per customer = average order value × purchases per yearAnnual gross profit = annual revenue per customer × gross marginCustomer lifetime value = annual gross profit × customer lifespan in years
Why this is a gross-margin CLV
Many lifetime value calculators report revenue, which overstates what a customer is worth by a factor of two or three at typical retail margins. This one applies gross margin so the result can be compared directly with acquisition cost and retention spend, which are also measured in margin dollars.
Estimating customer lifespan
If you know your annual churn rate, expected lifespan is roughly one divided by it: a business losing 25% of customers a year keeps the average customer for about four years. The churn calculator on this site gives you that rate. If the business has less than two years of history, cap lifespan at the length of data you actually have rather than extrapolating.
How to use the number
Lifetime value sets the ceiling on what you can spend to acquire and keep a customer. A loyalty program whose cost per member exceeds the lifetime value uplift it creates is a loss, however engaged the members look.
The most persuasive version of this metric for a finance audience is segmented: run the calculator once with the order value, frequency, and lifespan of loyalty members and once with the figures for non-members. The gap, multiplied by member count, is the program's contribution in margin terms.
Common mistakes
Using revenue instead of margin. Taking lifespan from your best segment and applying it to everyone. Treating frequency and lifespan as independent when, in practice, customers who buy more often also stay longer, so changing one input usually implies a change in the other.
These calculators are intended for planning and benchmarking. Use your own finance, attribution, and campaign data before making final budget decisions.
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Frequently asked questions
What is a good customer lifetime value?
Lifetime value is only meaningful relative to acquisition cost. A common rule of thumb is a margin-based lifetime value of at least three times the cost to acquire the customer; below about one and a half times there is little room for servicing, returns, and retention spend.
Does this calculator include acquisition cost?
No. It produces a gross figure: the margin a customer generates over their lifespan. Subtract your customer acquisition cost to get net lifetime value, which is the number to compare across channels.
Should future years be discounted?
For lifespans beyond about three years, finance teams usually apply a discount rate so that a dollar of margin in year five counts for less than one today. This calculator does not discount, so treat long-lifespan results as an upper bound.
How does a loyalty program change customer lifetime value?
Mostly through purchase frequency and lifespan; average order value tends to move last, if at all. Run the calculator with member and non-member figures to see which input the program is actually moving, and by how much.
Worked examples
Each example runs the same formulas as the calculator above, using figures typical of that kind of business.
Fast fashion ecommerce
An online apparel retailer with high repeat purchase rates and healthy margins targeting long-term customer value.
| Average order value | 120 $ |
|---|---|
| Purchases per year | 8 |
| Gross margin | 55 % |
| Customer lifespan | 4 years |
| Annual revenue per customer | $960 |
|---|---|
| Annual gross profit | $528 |
| Estimated CLV | $2,112 |
Niche subscription box
A specialty subscription service with modest order value but very frequent deliveries and committed customers.
| Average order value | 35 $ |
|---|---|
| Purchases per year | 12 |
| Gross margin | 38 % |
| Customer lifespan | 2 years |
| Annual revenue per customer | $420 |
|---|---|
| Annual gross profit | $160 |
| Estimated CLV | $319 |