Customer Lifetime Value Calculator (CLV)
Written by Thierno Sadou Diallo, formula verified per our methodology • Last checked on 9/9/2026
Customer lifetime value is calculated with average purchase value × annual purchase frequency × customer lifespan. For an average purchase of €50, 4 purchases a year, and 3 years of loyalty, the CLV is €600.
Explanation
Customer Lifetime Value (CLV, sometimes noted LTV) estimates the total revenue a customer generates on average over the entire duration of their relationship with a business, rather than being limited to the value of a single isolated purchase. This simple version of the calculation multiplies three elements: the average value of a purchase, the number of purchases made per year, and the number of years a customer stays active on average before they stop buying. More elaborate versions of this formula additionally incorporate a profit margin (to keep only the profit generated, not just revenue) or a discount rate (to account for the fact that a euro of future revenue is worth less than a euro of immediate revenue), but this basic version remains the most widely used for a first order of magnitude. CLV really comes into its own when compared against the cost of acquiring a customer already spent to obtain them: a CLV/CAC ratio often cited as a profitability benchmark sits around 3, meaning a customer ideally brings in at least three times what they cost to acquire, a margin considered necessary to cover the business's other costs beyond acquisition marketing alone — a budget itself worth evaluating with our ad spend return calculator.
Example: average purchase of €50, 4 purchases a year, 3 years of loyalty
Inputs
Average purchase value: €50. Purchase frequency: 4 per year. Customer lifespan: 3 years.
Calculation
CLV = 50 × 4 × 3 = €600.
Result
This customer profile generates on average €600 in revenue over their entire lifespan.
Frequently asked questions
Why compare CLV to customer acquisition cost (CAC)?
Because a high CLV isn't enough on its own: if the cost to acquire that customer exceeds or comes too close to their lifetime value, the business becomes unprofitable on that customer segment. A CLV/CAC ratio of at least 3 is often cited as a profitability benchmark, leaving enough margin to cover the business's other costs beyond marketing alone.
How can you estimate average customer lifespan without precise data?
A common approximation is to invert the annual customer churn rate: an average lifespan of 1 ÷ churn rate, for example about 5 years for an annual churn rate of 20%. Lacking sufficient historical data, a cautious estimate based on industry experience remains preferable to an arbitrarily invented value.
Is this simple formula enough for a major marketing investment decision?
For a major strategic decision, more sophisticated versions of the calculation (incorporating actual profit margin rather than gross revenue, and a discount rate for future cash flows) give a more reliable estimate. This simple version nonetheless remains a good starting point for a quick first estimate and a comparison between customer segments.