Customer Lifetime Value (LTV) Calculator

Customer Lifetime Value (LTV) is one of the most important metrics for ecommerce businesses. It tells you how much profit you can expect from a customer over their entire relationship with your brand. Understanding your LTV helps you:

Set marketing budgets: Know how much you can spend to acquire customers profitably
Prioritize retention: Understand the value of keeping customers longer
Optimize pricing: Make data-driven decisions about discounts and promotions
Evaluate channels: Compare which marketing channels bring the most valuable customers

Use the calculator below to calculate your LTV, LTV:CAC ratio, and payback period. The tool includes benchmarks and actionable insights to help you improve your customer value.

Calculate your customer lifetime value to understand how much each customer is worth over their entire relationship with your business. Use this to make informed decisions about marketing spend, customer acquisition, and retention strategies.

Customer Metrics

Average Order Value ($)Average amount a customer spends per order

Purchase Frequency (per year)How many times a customer purchases per year (e.g., 2.5 = every 4.8 months)

Customer Lifespan (years)Average number of years a customer stays active

Gross Margin (%)Profit margin after cost of goods sold (COGS)

Include Customer Acquisition Cost (CAC) for ratio analysis

Customer Acquisition Cost - CAC ($)Total marketing and sales cost to acquire one customer

LTV Analysis

Total Customer Value$375.00

Before margin (AOV × Frequency × Lifespan)

Customer Lifetime Value (LTV)$225.00

Net profit per customer over their lifetime

LTV:CAC Ratio7.50x

Excellent - Healthy ratio

Payback Period3.2 months

Time to recover CAC from customer profits

Additional Insights

Monthly Revenue per Customer$9.38

Annual Revenue per Customer$112.50

Retention Value$112.50

Value of retaining one customer for another year

Understanding Your LTV Results

LTV:CAC Ratio Benchmarks

3:1 or higher: Excellent - You can afford to invest more in customer acquisition
2:1 to 3:1: Good - Sustainable for long-term growth
1:1 to 2:1: Fair - Monitor closely, focus on improving retention or reducing CAC
Below 1:1: Poor - You're losing money on each customer

How to Improve Your LTV

Increase AOV: Upsells, cross-sells, product bundles, minimum order thresholds
Increase Purchase Frequency: Email marketing, loyalty programs, subscription models, reorder reminders
Extend Customer Lifespan: Better customer service, retention campaigns, win-back programs
Improve Gross Margin: Optimize pricing, reduce COGS, negotiate better supplier terms

What is Customer Lifetime Value (LTV)?

Customer Lifetime Value (LTV) represents the total profit a business can expect to earn from a single customer throughout their entire relationship. It's calculated by multiplying:

Average Order Value (AOV): How much a customer spends per order
Purchase Frequency: How many times they buy per year
Customer Lifespan: How many years they remain a customer
Gross Margin: Your profit percentage after cost of goods

Why LTV:CAC Ratio Matters

The LTV:CAC ratio compares how much a customer is worth versus how much it costs to acquire them. A healthy ratio is typically 3:1 or higher, meaning each customer is worth at least 3 times what you spent to acquire them. This ratio helps you:

Determine if your marketing spend is profitable
Identify opportunities to scale customer acquisition
Spot problems before they become costly

How to Use Your LTV Results

Once you've calculated your LTV, use it to:

Set CAC targets: If your LTV is $150, you can afford to spend up to $50 per customer (3:1 ratio)
Prioritize improvements: Focus on the metric with the biggest impact (AOV, frequency, or lifespan)
Test strategies: Model how changes in pricing, retention, or acquisition affect your LTV
Compare segments: Calculate LTV for different customer groups to find your most valuable segments

Customer Lifetime Value (LTV) Calculator – Free LTV Calculator