Customer lifetime value calculator
LTV calculator instructions
Steps to calculate customer lifetime value with an LTV calculator:
- Enter your average order value
- Enter the number of orders in your target period
- Enter the number of years you expect to retain the customer
- Enter your gross margin for the orders
Questions LTV will help you answer:
- How much can I afford to spend to acquire new customers?
- Which of my marketing initiatives should I abandon, and which should I scale up?
- Which product categories should I expand to maximize long-term profits?
LTV can help you answer all of these questions to make more timely, better-informed decisions for your business.
Advanced steps to calculate customer lifetime value with an LTV calculator:
- Create cohorts
- Track pattern of cohorts over time
- Produce LTV projection
Learn more about cohorts and LTV:
A “cohort” is a group of customers whose behavior we track over time. When calculating customer lifetime value with a simple LTV calculator, a cohort is the group of customers who made their first purchase in the same month. For example, if 100 people made their first purchase in July 2022, then we group them as the “July 2022” cohort and see how they spend over time.