Customer Lifetime Value Calculation

How do you find the Lifetime Value of a Customer (LTV)?

How to Calculate CLV?

CLV also termed as customer lifetime value is the prediction of the profit value that will be attained as a result of the relationship of the customer. It can also be termed as lifetime value of customer (LTV).
How To Calculate Clv
Formula :
CLV / LTV = (Annual Profit from the Customer x Number of years of the customer relationship ) - Initial Cost of Customer Acquisition

Clv Formula
Step 1:
Let us consider the profit gained by a 5 year period customer as 10000 dollars and the initial cost to acquire the customer as 5000 dollars. What would be the lifetime value of the customer (LTV)?
Annual Profit of the Customer = 10000 $
Number of Years of Customer Relationship = 5 years
Initial Cost of Customer Acquisition = 5000 $
Clv Step 1
Step 2:
Substituting the values in the formula,
CLV / LTV = (10000 x 5) - 5000
= 50000 - 5000
= 45000 $.
Clv Step 2
Hence, 45000 $ is the customer lifetime value (CLV).

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