LTV Calculator

LTV (lifetime value) – this is an important marketing metric that indicates the company's profit during the entire period of cooperation with the buyer/customer. To find out LTV, the calculation formula is not particularly needed. eSputnik offers a convenient and free online customer lifetime value calculator. Calculating LTV has never been so straightforward: enter only three parameters and get the final result immediately. We will tell you how to use our calculator and what it will give you.

LTV calculator: online calculation in seconds

Why use a formula - just use our handy and free calculator. It will allow you to find out the LTV indicator in seconds without worrying about the accuracy of the calculations.

To do this, enter the following data in the corresponding fields of the calculator:

• average check;
• average number of orders per month;
• average customer retention time.

When you fill in all the data, click on “Calculate” - the LTV result will be on the right.

If you don't know how the average bill is calculated, use the following formula:

Average check = Total revenue / Number of purchases

In addition to the calculator, you can calculate LTV in Power BI. And how to calculate LTV using cohort analysis - read this article on our blog.

How to calculate customer LTV manually

If you are interested in knowing what formula is used to calculate LTV manually, then let's review this question. To calculate Customer Lifetime Value, use the following formula:

For a better understanding of the methodology for calculating this indicator, we will give an illustrative example:

LTV: calculation example

Let's say a company provides cleaning services. The average cost of cleaning an apartment is $ 50. Every month, each client orders an average of 2 cleaning and uses the services for about 2 years, that is, 24 months. We substitute these numbers into our formula and we get:

LTV = 50 х 2 х 24 = 2400 $.

Accordingly, each client brings this company an average of $ 2,400. When you know the potential total profit from just one person, there is a great motivation to attract new customers and improve the quality of service. This is the same case when you realize how dear your clients are to you.

It is worth noting that the specified LTV formula does not consider marketing and other customer acquisition costs. Therefore, for the most accurate calculations, you can initially substitute the net profit value if you can calculate it accurately.

What is LTV calculation for?

If you still doubt whether it is your company that needs to calculate the LTV indicator or such calculations are still useless, then analyze right now what this will give you:

1. Knowing the lifetime value of a customer, you can predict the approximate amount of profit from a particular business or line of business. This allows you to assess profitability and anticipate possible financial risks, which is essential for building a successful project.
2. The marketing and advertising budget formation will be more balanced because you can rely on each newly attracted buyer's approximate amount of revenue. This means that you will not spend more on advertising and promotion than you can afford.
3. It will be possible to assess the obtained ROI more accurately and determine the currently reasonable cost of attracting customers (CAC) and their retention.
4. You will be able to find out whether the loyalty of your customers is increasing or decreasing, as well as the purchasing power of the target audience in the market.
5. The LTV ratio will help in the analysis of the ROMI indicator because these metrics are interrelated. You will see how quickly you can recoup your marketing investment.
6. Segmentation of customers by acquisition channels will allow you to calculate LTV for each specific category. With segmented metrics, you can see where more engaged customers are coming from, spending more, and staying with you longer. This means that it will be possible to reasonably distribute the advertising budget, focusing on the more profitable lead generation channels. You will also understand which customers are the most valuable to you to work hard to retain them.

Who needs to count LTV

Calculating customer lifetime value is useful for the following types of companies:

• mobile operators and internet providers;
• mass media and PR companies;
• SaaS companies;
• advertising agencies and website promotion companies;
• insurance companies and banking institutions;
• aggregators of goods and services;
• companies that work with subscription customers.

Where to get data for calculating LTV

For calculations on a calculator and using a formula, you need to know three indicators:

• average check - it can be found in Google Analytics or Yandex.Metrica, as well as in your CRM, if you use it to automate your business;
• average number of orders per month - this data is also available in the above analytics systems;
• average customer retention time - this value is indicated in months, it can be determined by analyzing the customer base in the same CRM.

How to evaluate the LTV result and increase its indicator

The analysis of the customer's lifetime value should only be carried out in comparison with other periods. If you notice that LTV is declining, then you need to evaluate which indicators in its composition began to deteriorate.

For example, the average check has become lower, so you need to work hard to increase it and try to sell more expensive products. When the number of orders decreases, work on up-sales and cross-sales, revise your pricing policy, analyze your competitors' USP, think about discounts and promotions. When the decline in LTV is due to customer churn and a shorter life cycle, it is worth considering various options for increasing loyalty and maintaining communication with customers.

The following tools will help you to increase LTV:

• retargeting, thanks to which the target audience will regularly see advertisements for your products, which means that customers will most likely buy from you more often and more;
• loyalty programs that motivate you to make purchases again and again, as well as increase your average check;
• omnichannel mailings (email, SMS, push notifications), which will allow you to maintain constant contact with customers, offer them discounts and bonuses, inform about new products and company news, show product recommendations.