Customer Lifetime Value Calculator

Calculate customer lifetime value for my e-commerce business using these inputs: - Average Order Value (AOV): $[X] - Average purchase frequency per year: [X] - Average customer lifespan (years): [X] - Gross margin: [X]% - Customer Acquisition Cost (CAC): $[X] Calculate LTV using: 1. Simple formula: AOV × Frequency × Lifespan 2. Margin-adjusted: Simple LTV × Gross Margin % 3. Discounted (using 10% annual discount rate to account for time value of money) Then analyze: - LTV:CAC ratio (target: 3:1+) - CAC payback period in months - Maximum sustainable CAC at current margins - Whether I should invest more in acquisition or retention, with specific reasoning [Optional: If I provide monthly cohort revenue data, also calculate cohort-based LTV by tracking actual cumulative revenue per customer over time.]

**LTV by Method:** | Method | LTV | Use For | |--------|-----|---------| | Simple (Revenue) | $900 | $75 AOV × 4 purchases/yr × 3 years | | Margin-Adjusted | $360 | $900 × 40% gross margin — use for budget decisions | | Discounted (10%/yr) | $312 | Time-value adjusted — most conservative and accurate | **Unit Economics Health Check:** | Metric | Value | Target | Status | |--------|-------|--------|--------| | LTV:CAC Ratio (margin) | 7.2:1 | 3:1+ | Under-investing in growth | | CAC Payback Period | 1.7 months | <12 months | Very healthy | | Max Sustainable CAC | $120 | — | $70 headroom vs. current $50 | **Sensitivity Analysis:** | Scenario | New LTV | LTV:CAC | Impact | |----------|---------|---------|--------| | Baseline | $360 | 7.2:1 | — | | Lifespan +6 mo (3.0 → 3.5 yr) | $420 | 8.4:1 | +$60/customer | | Frequency +0.5 (4.0 → 4.5/yr) | $405 | 8.1:1 | +$45/customer | | Both improvements | $473 | 9.5:1 | +$113/customer | **Recommendation:** Your 7.2:1 LTV:CAC ratio means you are leaving growth on the table. Acquisition: You can increase CAC from $50 to ~$80 and still maintain a healthy 4.5:1 ratio. Test higher-CAC channels (influencer, podcast) that attract brand-aligned customers. Retention: Your 3-year lifespan is good but not exceptional (top DTC brands achieve 4-5 years). Extending lifespan by 6 months adds $60 per customer. Invest in post-purchase nurture, loyalty tiers, and subscriptions. Suggested split: 60% acquisition / 40% retention for incremental budget. Monitor LTV by channel monthly to ensure new customer quality doesn't drop as you scale spend.