How is Customer Lifetime Value Measured?
Posted: Tue Mar 18, 2025 4:07 am
To calculate customer lifetime value, which predicts the total revenue a company can reasonably expect from a single account, you must calculate two factors: the average purchase value, and the average purchase frequency rate.
Average purchase value. Divide your company's total revenue over a period of time (usually a year) and multiply the result by the number of purchases during that same period.
Average Purchase Frequency Rate. Divide the number of purchases doctor database over the same period by the number of unique customers who made purchases during that period.
Once you have this data, you must calculate the following formula:
CLTV = Average Purchase Value * Number of Recurring Purchases * Average Customer Lifetime (Year/Month/Week)
Importance of CLTV in your Company
Calculating your company's CLTV is essential to gaining a clear picture of its growth. By analyzing CLTV in relation to CAC, you'll be able to determine how long it will take to recover your investment in customer acquisition and calculate the costs invested in marketing and sales.
CLTV will help you understand how much you can spend on customer acquisition and, thanks to its predictive feature, how much money your company will earn over a given period.
Average purchase value. Divide your company's total revenue over a period of time (usually a year) and multiply the result by the number of purchases during that same period.
Average Purchase Frequency Rate. Divide the number of purchases doctor database over the same period by the number of unique customers who made purchases during that period.
Once you have this data, you must calculate the following formula:
CLTV = Average Purchase Value * Number of Recurring Purchases * Average Customer Lifetime (Year/Month/Week)
Importance of CLTV in your Company
Calculating your company's CLTV is essential to gaining a clear picture of its growth. By analyzing CLTV in relation to CAC, you'll be able to determine how long it will take to recover your investment in customer acquisition and calculate the costs invested in marketing and sales.
CLTV will help you understand how much you can spend on customer acquisition and, thanks to its predictive feature, how much money your company will earn over a given period.