Customer lifetime value (CLV) calculator

What is customer lifetime value?

Customer lifetime value (CLV) represents the total revenue a business can expect from a single customer account throughout their relationship with the company. This metric helps startups assess the long-term value of their customer relationships and make informed decisions about customer acquisition and retention strategies.

How to calculate customer lifetime value

The formula for calculating CLV is:

CLV = Average Purchase Value × Average Purchase Frequency × Average Customer Lifespan

For example, if a customer spends an average of $100 per purchase, makes 4 purchases per year, and remains a customer for 3 years, their CLV would be:

$100 × 4 × 3 = $1,200

How to improve customer retention rates

Improving customer retention is crucial for increasing CLV. Thankfully, there are a few strategies you can consider implementing to help. Here are a few:

• Provide exceptional customer service: Good customer service can be a true difference maker. Respond promptly to inquiries and resolve issues quickly to build trust and loyalty.
• Implement a loyalty program: Once you've secured customers, making them feel valued is important. Reward repeat customers with exclusive discounts, early access to new products, or special perks.
• Personalize the customer experience: Acknowledge that all of your customers cannot fit in a box. Use data to tailor product recommendations and communications to individual customer preferences.
• Regularly seek and act on customer feedback: Let your customers steer the ship—within reason. Conduct surveys and use the insights to improve your products or services.
• Offer value outside of your core products: While your customers may have chosen you for your product, offering them resources to help them in other ways is a great way to provide additional value. Consider putting together educational content, webinars, or resources that help customers get the most out of your product or service.

Tips for increasing customer lifetime value

To boost your CLV, consider some of these strategies:

• Upsell and cross-sell: If you have multiple product offerings, be sure to up and cross-sell them. For example, if you have a tiered product, create a process for encouraging customers to move over to the next tier within a specific timeframe.
• Consider a subscription model: With so many businesses going the subscription model, it's worth at least weighing the same. By going this route, you can get customers to commit to recurring purchases, increasing their lifetime value.
• Focus on customer success: It's worth repeating how important good customer service is—but best-in-class support goes well beyond tickets. Help customers achieve their goals with your product or service, which can lead to increased satisfaction and loyalty.
• Revisit your pricing strategy: As the market changes and your products evolve, regularly review and adjust your pricing to ensure it reflects the value you provide and any current industry trends.