How to Calculate Customer Lifetime Value

One of the most important factors to proving your marketing ROI is by highlighting your customer lifetime value (CLTV). This is the projected revenue that a customer will generate during their lifetime.

Below are 3 methods to calculate CLTV.

Method 1

Subtract the average cost of acquiring a customer and the average cost of servicing the customers from the gross revenue generated from the customer over their lifetime.

Method 2

Multiply the average revenue customers generate per year by the average duration a customer remains with your business, then subtract the average cost of servicing customers.

Method 3

Calculate Gross Profit minus cost of goods sold and divide it by the number of unique customers.

Customer Lifetime Value is great because it brings both quantitative and long-term outlook to the activities invested in acquiring customers. But it also opens up doors for marketers to be able to have conversations with all stakeholders in rev-ops including sales and customer success teams. And when all teams are aligned, there’s to be more money to make. And that is healthy for any business.