# Calculate the customer lifetime value

Contributors

@elise-dopson

Forecast expected revenue and budget marketing campaigns more effectively.

## Divide your total annual revenue by the number of purchases made over that year to calculate the average value of a single purchase.

`Annual Revenue / Number of Purchases = Avg. Value of a Single Purchase`

## Calculate your average purchase frequency rate by dividing the number of purchases per year by the number of unique customers.

For example, if 1,000 customers make 2,500 purchases in a given year, your average purchase frequency rate is 2.5%.

## Multiply your average purchase value by your average purchase frequency rate to calculate your customer value.

`Avg. Purchase Value x Average Purchase Frequency Rate = Customer Value`

## Multiply the average customer value by the average customer lifespan.

This number is your Customer Lifetime Value, commonly known as CLTV. It tells you the average amount a customer will spend with you in their lifetime. For example, if your average customer value is \$500, and they’re a customer for three years, your CLV will be \$1,500.

Last edited by @hesh_fekry 2023-11-14T11:10:28Z