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Use this CLTV calculator to assess the overall profitability of your customer relationships, optimize your marketing spend, tailor your customer service efforts, and prioritize high-value customer segments for long-term business success.
What is CLTV, Anyway?
Customer Lifetime Value (CLTV) is a metric that represents the total amount of revenue a business expects to earn from a customer throughout the entire business-customer relationship. CLTV helps businesses understand the value of acquiring and retaining customers guiding marketing and sales strategies.
Customer Lifetime Value (Revenue per Customer ➖ Acquisition Cost) ✖️ Customer Relationship Length
- Revenue per Customer (Yearly): $500
- Customer Relationship (Years): 3
- Customer Acquisition Cost (Yearly): $100
- CLTV: $1,200
- Company A can expect to earn $1,200 from a customer over 3 years.
- Revenue per Customer (Yearly): $1,000
- Customer Relationship (Years): 5
- Customer Acquisition Cost (Yearly): $200
- CLTV: $4,000
- Company A can expect to earn $4,000 from a customer over 5 years.
What’s the Difference Between LTV vs CLV vs CLTV?
LTV, CLV, and CLTV are all acronyms for the same thing: Customer Lifetime Value. This is a metric that measures the total revenue that a business can reasonably expect to generate from a single customer account throughout the business relationship.
The terms LTV, CLV, and CLTV are often used interchangeably, but there are some minor differences in how they are calculated.
- LTV is typically calculated by multiplying the average revenue per user (ARPU) by the average customer lifetime.
- CLV is typically calculated by multiplying the total revenue generated from a single customer account by the customer’s probability of remaining a customer.
- CLTV is the most comprehensive calculation of customer lifetime value, and it considers factors such as customer churn, customer upgrades, and customer referrals.
Despite these minor differences, LTV, CLV, and CLTV all measure the same thing: the total revenue a business can expect to generate from a single customer account over the lifetime of the relationship.
TL;DR: CLTV, or Customer Lifetime Value, is a metric that measures the total revenue that a business can reasonably expect to generate from a single customer account throughout the business relationship. It is an important metric for businesses to track because it can help them understand the profitability of their customer relationships and make informed decisions about customer acquisition and retention strategies.