How this calculator works
The averages method multiplies purchase value by purchases per year and relationship length in years. The totals method derives purchase value from revenue divided by purchases and annualizes purchase frequency over the observation window. Use consistent customer cohorts and exclude tax and refunds from revenue. Lifetime value here means revenue, before fulfilment cost, customer acquisition cost and discounting. The cohort mode divides summed customer lifespans by the cohort customer count. The inverse modes recover one missing average or a supporting business total.
Formula
Average purchase value = revenue / purchases. Annual purchase frequency = purchases / customers / observation years. Annual customer value = purchase value x annual frequency. CLTV = annual customer value x lifespan in years.
Worked example
An average $50 purchase, four purchases per year and a five-year relationship imply $1,000 lifetime revenue. Alternatively, $120,000 revenue from 2,400 purchases and 600 customers over two years gives a $50 average purchase and two purchases per year; at three years of lifespan CLTV is $300.
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Frequently asked questions
Does this measure profit?
It measures lifetime revenue. Multiply by a suitable contribution margin and consider acquisition costs to estimate customer profitability.
How do I use monthly purchase frequency?
Convert it to purchases per year by multiplying by twelve, or derive it from a monthly observation window in the totals mode.
Can an average purchase count be fractional?
Yes. An average rate or an inferred count can be fractional. Actual observed purchases and customer counts in the totals mode must be whole numbers.