Customer Lifetime Value (CLV): Formula and Examples

Customer lifetime value is the single number that tells you how much a customer is worth and, by extension, how much you can afford to pay for one. Get it wrong and every acquisition decision downstream is built on sand. Get it right and you know exactly which lever to pull: more orders, bigger orders, or customers who stay longer.

This guide covers the three CLV formulas worth knowing, two worked examples (an ecommerce store and a supplement subscription), what a good LTV:CAC ratio looks like, how email and SMS move each variable, and how Klaviyo’s predictive CLV works. If you just want the number, use the free customer lifetime value calculator.

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What is customer lifetime value?

Customer lifetime value (CLV, also written LTV) is the total revenue, or ideally the gross profit, a business expects to earn from one customer over the whole relationship. The simple formula is average order value × purchase frequency × customer lifespan. It sets the ceiling on what you can spend to acquire a customer.

There are two flavours:

• Historic CLV adds up what customers have actually spent. It is fact, but it looks backwards.
• Predictive CLV estimates what a customer will spend from here. It is a forecast, and it is what you need for budgeting and segmentation.

CLV, LTV and CLTV are the same metric. The differences that matter are revenue versus profit, the time horizon, and whether you calculate it for an average customer or a cohort.

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The CLV formula: three versions

1. Simple CLV (revenue)

CLV = Average order value × Purchase frequency × Customer lifespan

• Average order value (AOV) = revenue ÷ number of orders
• Purchase frequency = orders ÷ unique customers, over a year
• Customer lifespan = average number of years a customer keeps buying

This is the formula Google’s AI Overview and most guides lead with. It is fine for a first read, but it measures revenue, and you don’t pay acquisition costs out of revenue.

2. Margin-adjusted CLV (gross profit)

CLV = AOV × Purchase frequency × Customer lifespan × Gross margin %

If you don’t know lifespan, estimate it from churn:

Customer lifespan = 1 ÷ churn rate

A store that loses 40% of its active customers each year has an average lifespan of 1 ÷ 0.40 = 2.5 years. For a monthly subscription, use monthly churn and you get lifespan in months.

This is the version to compare with customer acquisition cost (CAC). Finance teams sometimes also apply a discount rate so that a dollar earned in year three counts for less than a dollar today. For most DTC brands with a two-to-four-year horizon, using gross margin and a conservative lifespan matters far more than discounting.

3. Cohort-based CLV (the one to trust)

The first two formulas describe an average customer who doesn’t exist. Cohort CLV uses what real groups of customers actually did.

1. Group customers by the month of their first order (the January 2025 cohort, the February 2025 cohort, and so on).
2. For each cohort, add up all revenue (or gross profit) from those customers over the following 3, 6, 12 and 24 months.
3. Divide by the number of customers in the cohort.

Here is an illustrative cohort for a DTC store with a 55% gross margin:

January cohort: 1,000 first-time buyers	Cumulative revenue per customer	Cumulative gross profit per customer
First order	$62	$34
Month 3	$81	$45
Month 6	$97	$53
Month 12	$121	$67
Month 24	$158	$87

The 12-month value is your “12-month CLV”, and it is far more defensible than a lifetime guess. Cohorts also show you whether things are improving: if the March cohort reaches $121 by month nine instead of month twelve, your retention work is paying off. Shopify’s customer cohort analysis report is a good starting point, and most retention analytics tools will build this table for you.

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How to calculate LTV from your own data

To run the simple or margin-adjusted formula on real numbers, pull the last 12 months from your store platform:

1. AOV: net sales ÷ orders. Use net sales (after discounts), or you will overstate value in any discount-heavy account.
2. Purchase frequency: total orders ÷ unique customers who ordered.
3. Churn rate: of the customers who bought in the previous 12 months, what share did not buy again in this 12 months? Lifespan = 1 ÷ that rate.
4. Gross margin: revenue minus cost of goods, shipping and payment fees, as a percentage of revenue.
5. CAC: paid media spend ÷ new customers acquired in the same period.

Then plug them into the CLV calculator, which also models what a lift in repeat orders is worth.

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Customer lifetime value example: ecommerce store

A homewares brand has these numbers:

Input	Value
Average order value	$85
Purchase frequency	1.6 orders per year
Customer lifespan	2.5 years (40% annual churn)
Gross margin	55%
CAC	$60

• Revenue CLV = $85 × 1.6 × 2.5 = $340 (4 orders over the relationship)
• Margin-adjusted CLV = $340 × 55% = $187
• LTV:CAC = $187 ÷ $60 = 3.1:1

That is healthy on paper. Now look at where the value sits: the first order is worth $85 in revenue and $46.75 in gross profit, which doesn’t cover the $60 CAC. The business only makes money from the second order onwards. That is true for most DTC brands with paid acquisition, and it is why repeat purchase rate matters more than almost any other number in your account.

If email and SMS lift repeat orders by 10% (3 repeat orders become 3.3), margin-adjusted CLV rises by about $14 per customer. Across 10,000 new customers a year, that is roughly $140,000 in extra gross profit with no extra acquisition spend.

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CLV example: supplement subscription

Subscriptions make the maths cleaner because frequency is fixed. A supplement brand sells a $49 monthly subscription:

Input	Value
Monthly price	$49
Monthly churn	12%
Average lifespan	1 ÷ 0.12 = 8.3 months
Gross margin	65%

• Revenue CLV = $49 × 8.3 = $408
• Margin-adjusted CLV = $408 × 65% = $265

Now cut monthly churn from 12% to 10%. Lifespan becomes 10 months, revenue CLV $490, margin-adjusted CLV $319. Two points of churn are worth about $53 of gross profit per subscriber. For a brand starting 2,000 subscriptions a year, that is about $106,000.

Two things catch supplement brands out:

• The first-order discount. If the first box ships at 30 to 50% off, recalculate CLV with the real first-order revenue, or your CAC ceiling will be too generous.
• Recurring orders in email attribution. Subscription renewals happen whether or not an email was sent. Klaviyo’s own guidance for subscription brands is to report on a non-recurring placed order metric so renewals don’t inflate email’s credit. More on that in Klaviyo metrics explained.

For a supplement-specific playbook, see our supplement email marketing page.

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What is a good LTV to CAC ratio?

The commonly quoted rule of thumb is 3:1: margin-adjusted CLV around three times CAC. Treat it as a sense check, not a law:

LTV:CAC (on gross profit)	What it usually means
Below 1:1	You lose money on every customer you acquire
1:1 to 3:1	Profitable at gross margin, thin once overheads and returns are counted
Around 3:1	Healthy for most DTC businesses
Above 5:1	Very efficient, and possibly under-investing in growth

Two caveats. First, calculate the ratio on gross profit; a revenue-based “4:1” can be a gross-profit 2:1. Second, look at payback period, the number of months until a customer’s cumulative gross profit covers CAC. A 3:1 ratio that takes 30 months to pay back can still starve a brand of cash. Your cohort table gives you payback directly.

There is no universal “good CLV”. A $150 CLV is excellent at a $30 CAC and a problem at $120.

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How to increase customer lifetime value with email and SMS

Every CLV improvement comes from one of four variables. Email and SMS move all four, and they are the cheapest channels to do it with, because you already own the audience.

Purchase frequency: get the second order

The gap between first and second purchase is where most lifetime value is lost. The fix:

• A post-purchase flow that onboards, asks for a review and makes a relevant next recommendation.
• Replenishment reminders timed to real consumption. A 30-serving supplement should trigger a reminder around day 22 to 25, not day 30.
• SMS for time-sensitive moments (restock, replenishment, last-chance) where speed matters more than depth. Our email and SMS strategy guide covers how to split the two channels.

Average order value: make each order bigger

• Bundles and “complete the routine” cross-sells in post-purchase and browse abandonment flows.
• Free-shipping thresholds set just above your current AOV, stated in the email.
• Product recommendations driven by what the customer actually bought, not bestsellers.

Lifespan: stop customers drifting away

• Churn-risk segments that trigger before a customer lapses, not six months after.
• A win-back flow that leads with value before discount.
• Subscription save flows: skip, swap or pause options before cancel.
• RFM segmentation so “needs attention” customers get a different message from champions.

Margin: stop paying for loyalty you already have

Blanket discounts to your whole list give margin away to customers who would have bought anyway. Reward your top customers with early access, exclusives and service instead. Your margin-adjusted CLV will thank you.

This is the work our retention marketing agency team does day to day. When Relaxium brought Pete in as Head of Retention Marketing, the program added $3M in extra annual revenue from email and SMS. The gaps closed were campaign cadence and segmentation depth, not acquisition.

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CLV in Klaviyo’s predictive analytics

Klaviyo calculates CLV for you once your account has enough order data. As of September 2026, Klaviyo’s help centre describes these profile-level predictions:

Klaviyo metric	What it means
Historic CLV	The total value of all previous orders, taking refunds and returns into account
Predicted CLV	How much the customer is predicted to spend in the next year
Total CLV	Historic CLV + predicted CLV
Churn risk	The probability the customer has stopped buying, shown as a value between 0 and 1
Expected date of next order	When the customer is predicted to order again
Average time between orders	The mean number of days between the customer’s orders

Eligibility. Klaviyo requires at least 500 customers who have placed an order, an ecommerce integration or API order tracking, at least 180 days of order history with orders in the last 30 days, and some customers with three or more orders. The model retrains at least weekly, and Klaviyo notes that predictions are most reliable when averaged across groups of customers rather than read one profile at a time.

Where to find it. Predictions appear in the Predictive analytics section of each profile’s Metrics and insights tab. To act on them, build a segment with the Predictive analytics about someone condition and choose historic, predicted or total CLV, or churn risk. The dedicated CLV dashboard, which lets you change the prediction window and shows which segments, flows and campaigns use CLV, needs a Marketing Analytics or Advanced KDP subscription.

How we use it:

• Rising stars: predicted CLV in your top band but historic CLV still low. Treat them like VIPs early.
• At-risk high value: high historic CLV and rising churn risk. These get a personal, non-discount win-back first.
• Low predicted CLV: keep them on a lighter cadence so you protect deliverability and your Klaviyo bill.
• Timing: use expected date of next order to time replenishment and cross-sell sends per customer instead of per product.

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Common CLV mistakes

• Using revenue, not gross profit. It inflates the CAC you think you can afford.
• One average for everyone. CLV is heavily skewed. Run it by acquisition channel, first product and cohort.
• Over-estimating lifespan. “Customers stay five years” is usually a hope, not data. Use churn.
• Ignoring returns and first-order discounts. Both cut real value.
• Crediting email with orders that were always going to happen. Subscription renewals and loose attribution windows inflate email’s contribution. Our guide to email revenue attribution in Klaviyo explains how to report it honestly.

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Related tools

• Customer lifetime value calculator: CLV, margin-adjusted CLV, LTV:CAC and repeat-rate uplift.
• Email list value calculator: what your subscriber list is worth per year.
• Klaviyo ROI calculator: whether your email program pays for itself on incremental revenue.

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The bottom line

CLV is AOV × frequency × lifespan, but the useful version is the one multiplied by margin, calculated by cohort and compared with CAC. For most ecommerce and supplement brands the profit sits in the second, third and fourth orders, and those orders are exactly what a well-built email and SMS program produces.

If you want to know where your repeat purchase rate is leaking, request a free Klaviyo audit. We’ll show you, in dollars, what the gap between your first and second order is costing you.