Customer Lifetime Value (CLV) Calculator

Enter Average Revenue Per User (ARPU):



Enter Gross Margin (as decimal, e.g., 0.6 for 60%):



Enter Churn Rate (as decimal, e.g., 0.05 for 5%):



Calculate

Customer Lifetime Value (CLV):

Customer Lifetime Value (CLV) is a crucial metric that estimates the total revenue a business can expect from a single customer account throughout their relationship. Knowing your CLV helps in making informed decisions about marketing spend, customer retention strategies, and overall business growth.

Formula
Customer Lifetime Value is calculated by multiplying the Average Revenue Per User by the Gross Margin, and then dividing by the Churn Rate.
In simple terms: CLV = (Average Revenue Per User × Gross Margin) ÷ Churn Rate

How to use
To use the CLV Calculator:

1. Enter the Average Revenue Per User (ARPU), which is the average amount a customer generates.
2. Input the Gross Margin as a decimal (for example, 0.6 for 60%).
3. Enter the Churn Rate as a decimal (for example, 0.05 for 5%).
4. Click “Calculate” to get the Customer Lifetime Value.

Example
If ARPU is 100, Gross Margin is 0.6 (60%), and Churn Rate is 0.05 (5%), then:
CLV = (100 × 0.6) ÷ 0.05 = 1200
This means the expected revenue from one customer over their lifetime is $1200.

FAQs

1. What is Customer Lifetime Value (CLV)?
   CLV estimates the total revenue a customer will bring during their relationship with a business.
2. Why is CLV important?
   It helps businesses decide how much to spend on acquiring and retaining customers.
3. How do I calculate Average Revenue Per User (ARPU)?
   Divide total revenue by the number of users/customers.
4. What is Gross Margin?
   The percentage of revenue left after subtracting the cost of goods sold.
5. What does Churn Rate mean?
   The percentage of customers who stop using your product or service in a period.
6. Can CLV be negative?
   No, it should be positive as it represents revenue.
7. How often should CLV be calculated?
   Regularly, to adjust marketing and retention strategies.
8. What if Churn Rate is zero?
   CLV calculation is invalid if churn rate is zero because it means no customers leave.
9. How can I reduce Churn Rate?
   By improving customer service, product quality, and engagement.
10. Can CLV help increase profits?
    Yes, by focusing on high-value customers and retention.
11. Is CLV relevant for subscription businesses?
    Yes, it’s especially important for recurring revenue models.
12. How accurate is the CLV calculation?
    It’s an estimate based on current data and assumptions.
13. What if my Gross Margin is low?
    Low margins reduce CLV, so improving efficiency helps.
14. Can I use this calculator for different customer segments?
    Yes, segmenting customers can give more accurate CLV insights.
15. Is ARPU always revenue per month?
    It depends on your business model; it could be monthly or yearly.
16. How can CLV impact marketing budgets?
    Higher CLV justifies higher customer acquisition costs.
17. Can this calculator handle decimals?
    Yes, it supports decimal inputs for precision.
18. Does this calculator factor in discount rates?
    No, it’s a basic CLV formula without time value of money.
19. What other metrics complement CLV?
    Customer Acquisition Cost (CAC), churn rate, and retention rate.
20. How can I improve my CLV?
    Increase ARPU, reduce churn, and improve gross margin.

Conclusion
Understanding your Customer Lifetime Value is vital for maximizing business profitability and growth. This simple calculator helps you quickly estimate CLV, enabling smarter marketing, sales, and retention strategies. Regularly measuring and improving CLV ensures you get the best value from every customer relationship.