Customer Lifetime Value (CLTV) Calculator
From average order value, purchase frequency and lifespan, estimate a customer's lifetime value (LTV).
Input Data
Results
At a glance:CLTV estimates the total profit a customer brings over the relationship. Simple revenue LTV = average order value x purchase frequency x lifespan. Profit LTV = revenue LTV x contribution margin. Example: AOV HK$500, 4x/year, 3y → revenue LTV HK$6,000; at 30% margin, profit LTV HK$1,800. Compare with CAC: LTV/CAC > 1 means acquisition pays off (3x+ commonly healthy). WARNING: A forecast on assumptions (retention, frequency, margin); use conservative inputs and update. Education, not advice.
Formula
Annual value = average purchase value × purchases per year.
CLTV = annual value × customer lifespan.
How to Use
- Enter the average order value.
- Enter purchase frequency and customer lifespan.
- Optionally enter the contribution margin for a profit LTV.
- View the estimated CLTV.
FAQ
What is a good LTV/CAC ratio?
Above 1 means each customer returns more than they cost; 3x or more is commonly seen as efficient and sustainable. Below 1 means you lose money acquiring each customer. But too high (e.g. 10x) may mean you are under-investing in growth — you could acquire more profitably.
Why is retention important to LTV?
Lifespan (retention) multiplies the value directly. Keeping a customer one more year roughly adds another year of margin; losing them early collapses the LTV. Since retaining is usually cheaper than acquiring, improving retention is often the fastest way to lift LTV.
Revenue LTV vs profit LTV — which to use?
Revenue LTV (no margin) tells the top-line value; profit LTV (x contribution margin) tells what actually drops to the bottom line and is the better input for acquisition budgeting and CAC comparison. Use profit LTV for decisions; revenue LTV is a quick view.
How do I estimate the lifespan?
From historical data: average years customers stay, or 1 / churn rate (e.g. 12% annual churn ≈ 8.3-year average lifespan; 2% monthly ≈ ~4 years). Use your real churn; optimistic lifespans overstate LTV.
How does this relate to Hong Kong SMEs?
For HK retail, F&B and subscription businesses, CLTV helps set a sensible marketing budget and judge repeat-purchase programmes (membership, loyalty). Pair with the CAC and churn-rate calculators; the HKPC and HKTDC offer SME support. Education, not advice.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.