The most popular definition of CLV is the total amount of money a customer is expected to spend on products/services of a business.
There are two approaches to calculate CLV. The first approach is based on a business historical data. This approach is based on an assumption that the future will be similar to the past. The second method is based on some predictive models based on external data. This approach is based on an assumption that relations found in the data will be true in real life in the future.
There are many formulas and calculators available to calculate CLV. A simple free calculator uses only two variables: an average revenue per customer per year -ARCY and a rate of retention of customers per year -RRY.
Enter all values into the input fields and click on the button “Show CLV!”
This calculator is helpful in determinations of profitability of marketing and advertisement campaigns.
