What Is Customer Lifetime Value?
LTV (customer lifetime value) estimates the total revenue a business can expect from one customer over the entire time they keep buying — not just their first purchase. It's the counterpart to CAC: knowing what a customer is worth over time tells you how much you can afford to spend acquiring them.
This calculator uses the simplified version of LTV, built from three numbers most businesses already track: how much a typical order is worth, how often a customer buys, and how long they keep buying for.
LTV Formula
Multiply average order value by purchase frequency and customer lifespan.
LTV = Average Order Value × Purchase Frequency × Customer Lifespan
Worked Example
A customer spends $80 per order, buys 5 times a year, and stays a customer for 3 years.
LTV = $80 × 5 × 3 = $1,200
What Affects LTV?
- Average order value — upsells, bundling, and higher-priced offerings all raise LTV directly.
- Purchase frequency — loyalty programs, subscriptions, and re-engagement campaigns increase how often customers buy.
- Retention / lifespan — anything that reduces churn extends how long a customer keeps generating revenue.
- Customer segment — LTV often varies substantially by acquisition channel or customer type, so a single blended figure can hide meaningful differences.
LTV Calculator FAQ
How is customer lifetime value calculated?
This calculator uses the common simplified formula: LTV = Average Order Value × Purchase Frequency (per year) × Customer Lifespan (in years). Enter your three inputs above to calculate it instantly.
Is this the same as "predictive LTV" from analytics platforms?
No — this is the simplified historical-average formula, useful for quick unit-economics checks. Predictive LTV models used by some analytics platforms apply cohort-based statistical modeling to forecast future value per customer, which can differ meaningfully from this simpler estimate.
Should I use gross revenue or profit for average order value?
Either works depending on what you want the result to represent — using profit per order instead of revenue gives you a profit-based LTV, which is more directly comparable to CAC when deciding how much you can afford to spend acquiring a customer.
How do I use LTV alongside CAC?
Divide LTV by CAC to get a ratio — a common rule of thumb targets at least 3:1, meaning a customer is worth at least three times what it cost to acquire them. Use the LTV:CAC ratio calculator to check that directly.